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Before talking about the bond itself, it will be necessary to define just what a credit services organization is. This type of company charges a fee for services it renders to individuals in need of credit repair, and sometimes also in need of more credit than they already have. Many of the states in this country require that such organizations obtain a credit service organization bond in order to conduct business within state borders.
As is the case with all surety bonds, a credit repair bond is an agreement between three parties, the principal (the credit service organization), an obligee (the state which requires the bond), and a surety company, which issues the bond. The terms of the bond are written so as to provide a guarantee that the principal will conduct its business according to all state laws and regulations in effect at the time. The bond is intended to protect clients of the organization from financial loss in the event that the credit service organization is guilty of some kind of professional misconduct.
When the credit service organization fails to live up to the terms specified in the bond agreement, or if it clearly acts in a fraudulent manner, a client of the company is entitled to make a claim against the bond posted by the company. If the claim is found to be valid, the surety company would have to pay the full amount of the claim made against the bond, after which it would retrieve that same sum from the credit service company (the principal). The purpose of this kind of arrangement is to ensure that any involved funds are handled in an ethical manner and that consumers are protected against fraudulent credit service organizations.
Generally speaking, the cost of a credit repair bond will depend on the company’s credit score and credit history. This makes sense, because any company which represents a higher risk to the surety company issuing the bond, should logically expect to pay more to obtain the bond. Companies with a good credit score and with a good business credit history can probably expect to pay between 1 percent and 4 percent of the face value of the bond, so, for instance, a bond in the amount of $100,000 would cost just $1,000 or thereabouts to a credit service organization with good credit.
Companies that have less than perfect credit history might have to pay anywhere from 4 percent to 15 percent of the face value of a bond amount. The same $100,000 bond if purchased by an organization with a very poor credit history might have to pay as much as $15,000 to obtain the bond. The good news is that poor credit history does not necessarily disqualify an organization from obtaining the needed bond, it’s just likely to cost significantly more than it would for other companies with good credit.
It’s fairly easy to obtain a surety bond for credit repair business, and for your first step, you should apply online at the site for a surety company that is authorized to sell these bonds in your state. NFP is one of the nation’s largest sellers of surety bonds and is also one of the country’s most reputable vendors. When you apply, you’ll be required to supply the credit scores of your organization’s owners, the legal name of your company, and the bond amount that is standard for your state (NFP can confirm this for you).
When your application has been reviewed and approved, you will be issued an indemnity agreement, and this must be signed and returned to the surety company. Once the surety receives this document back, the bond can be issued and your organization is legally covered as of that moment.