Sureties may use consumer credit reports to evaluate the risk of a bond applicant. The credit reports give an overview of an applicant’s financial habits, as well as the applicant’s ability to pay financial obligations in a timely manner. They often include payment histories, public record information, and investigative reports.

The Fair Credit Reporting Act regulates the credit reporting industry. The act defines a consumer report as any communication from a reporting agency concerning a consumer’s credit status. The report is meant for evaluating a consumer’s credit for personal purchases, insurance, or employment. Credit report agencies may only issue credit reports for evaluating a consumer’s credit for these reasons.

The following three companies provide most consumer credit reports:

  1. Equifax Credit Services
  2. Experian Information Solutions
  3. Trans Union Credit Information Company

These companies provide information on a consumer’s history of employment, credit, payments, account, and any public filings. Public filings may include liens, bankruptcies, and judgments. However, bankruptcies occurring a decade ago or more are not allowed in credit reports, as well as most unfavorable judgments and liens older than seven years old. The report will include personal information as well, such as the individual’s age, residence, and phone number. However, the credit report WILL NOT include information about the consumer’s sex, race, religion, or ethnicity.

Why do sureties evaluate a principal’s credit worthiness? Sureties need to ensure their principals can indemnify the obligee in the event of a claim on the bond. If an applicant has a poor history of paying debts, judgments, taxes or other financial obligations, the surety views the applicant as a risk and will deny the application. Credit reports not only provide this information, but they also provide it without any bias.