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SOURCE: DBL Surety
The Florida Construction Industry Licensing Board now requires newly licensed construction contractors with a FICO-derived credit score less than 660 to obtain a Division I or II Contractor's License Surety Bond otherwise referred to as a Financial Stability Surety Bond. DBL Surety describes the new surety bond requirement, how to reduce it, and how it relates to traditional surety underwriting.
Daytona Beach, Florida (PRWEB) January 06, 2013
The State of Florida instituted a new surety bond requirement for all newly licensed contractors and those contractors who transfer their license status (i.e. transfer to a new company, etc.) who have a FICO-derived credit score less than 660. The new contractor license surety bond requirement is an effort by the Construction Industry Licensing Board to make individual licensees responsible for fines and fees levied by the state according to Florida Administrative Code Rule 61G4-15.006. The presence of a surety bond allows some recourse for the state by allowing them to make a claim on the Division I or II Contractor's License Bond should the licensed construction contractor decide not to pay the assessed fines and fees.
The Division I and II Contractor's License Surety Bond amount depends on the contractor's line of business. Division I contractors are those licensees who currently hold or are applying for a general, residential, or building contractor license and the surety bond amount is set at $20,000. Division II contractors are those licensees who currently hold or are applying for a contractor license other than a general, residential, or building contractor license and the surety bond amount is set at $10,000. Typical Division II contractors include HVAC, Electrical, and the like. However, both bond amounts can be reduced by 50% ($10,000 for Division I and $5,000 for Division II) by taking a financial responsibility class and submitting the class completion certificate to the state with their application.
The new bond requirement is somewhat of a Catch 22 in terms of how surety bonds are traditionally underwritten. In general, surety companies underwrite most bonds using a combination of factors which demonstrate the bonded individual or entity's ability to reimburse the surety for any claims it must pay. In most cases, an individual's credit score has a major impact on the surety's willingness to write a bond. This creates and interesting predicament as the contractor needs the Division I or II License Bond because of his or her credit score but the surety doesn't want to provide it because a credit score less than 660 doesn't meet their underwriting requirements.
However, there are some surety companies who are willing to write these bonds regardless of credit issues. These companies participate in what's referred to as the nonstandard marketplace. Premiums in the nonstandard marketplace range from 5-15% of the surety bond amount which are markedly higher than the typical 1-3% premium rates offered in the standard marketplace. Those Division I and II Contractor License Bond applicants with credit scores closest to 660 should expect to pay on the lower end of the scale while those with lower credit scores should expect to pay a higher rate than their counterparts.
Please visit DBL Surety's Division I and II Contractor License Surety Bond page to learn more, call us at 386-315-2547, email us at info(at)dblsurety(dot)com, or fill out our streamlined application to get bonded today! Looking for information on other surety bonds? Visit DBL Surety's homepage to learn more.
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