If you or a loved one is in jail and seeking a prompt release from custody, bail bonds are a sure way to secure a quick release. With bail bonds, you only have to pay a premium, a small percentage of the full bail amount. Your bail bondsman commits to paying the court the full bail amount if you do not attend court hearings. Most people often inquire about the relationship between bail bonds and credit scores. What is the financial impact of bail? Read on to learn more about the financial and credit implications of bail bonds.
Understanding a Bail Bond
A bail bond is a commitment made by a criminal defendant to show up for court proceedings or surrender a sum of money set by the judge. The bail can be posted through a bail bondsman, who charges an offender a fee for guaranteeing the bail. A bail bondsman shields you from experiencing the adverse financial impact of bail.
By only having to pay a small fraction of bail as a bail bond premium, the financial impact of bail is reduced. An individual charged with an offense is granted a bail hearing before the judge. It is upon the judge’s discretion to decide the amount of bail. The judge can deny you bail or set it at an astronomical level if you face charges for a violent offense or are a flight risk.
The financial impact of bail depends on the type of charges you face. The judge often has a broad latitude in deciding bail amounts, which differ by jurisdiction. You could be granted $500 bail if you face charges for non-violent misdemeanors. Felony crimes can attract a high bail amount, commonly $20,000 or more.
Understanding Credit Scoring
A credit score is a three-digit number used to rate an individual’s creditworthiness. Fair Isaac Corp (FICO) says a person’s credit score should range between 300 and 850. You will be approved for loans and better rates if you have a higher credit score. An individual’s credit score is based on their credit record, which includes details like repayment history, total debt levels, the number of accounts, and other factors. Creditors often use credit scores to determine a person’s creditworthiness or the likelihood that he/she will repay loans promptly.
There are three main credit bureaus used in the United States. They include TransUnion, Experian, and Equifax. These three dominate the market for gathering, analyzing, and disbursing consumer information in the credit markets.
Credit Implications Of Bail Bonds
There are no direct credit implications of bail bonds because a bail bond is not a loan. However, credit implications of bail bonds can arise if you take out a loan to pay the bail bond premium and fail to repay it.
An Arrest And Your Credit Score
Being arrested and put behind bars can make it hard to repay any debt you owe, hurting your credit score. A conviction and jail term cannot hurt your credit score directly, but the secondary effects have significant weight.
Arrest is also not good for your job prospects in many ways. Being behind bars will prevent you from working and earning an income. This will limit your ability to pay your existing debts, which will be reflected negatively on your credit report. An arrest will also affect your ability to secure employment. It will also cause you to lose your previous job. Lacking a job and the earnings it brings will negatively affect your credit score.
Your credit score can also be affected because of the following:
Fraud
Your credit will not be affected directly because of a fraud conviction. However, the Credit Industry Fraud Avoidance System (CIFAS) can present your name to prospective creditors. These details cannot be used to produce your credit score but can be included in the detailed version of your credit report.
Banks must protect their existing customers from risks like fraud, financing of terrorism, and money laundering. A bank can withdraw its services to you if you are convicted of fraud. If this happens, your credit score will be affected because you cannot secure a loan.
Late Payments
Contacting your creditor if you have debts before going to prison is essential. You should notify them of the change in circumstances. It will be hard to meet a payment agreement if you are sent to jail. Your credit score will be negatively affected if you fail to make your timely payments. Lenders will consider this an indicator of unreliability and poor financial management.
Home Address
Your credit report will show various addresses within a short period if you must change address as part of your license conditions. The lack of a fixed phone number will also hurt your credit score.
Prison Address
The lenders will be cautious if you give a prison address like the one you have been living at. This information makes you less likely to secure a loan, especially a mortgage.
Closure Of A Bank Account
The bank cannot close your account even if it establishes that you have been convicted of a crime. They can also close your account if it becomes inactive for longer. Your credit rating will not be negatively affected but can suffer if the bank closes your account while you have unpaid debts sent to collection.
Bail Bonds And Credit Score
There is no direct relationship between bail bonds and credit score. However, bail can affect your credit score indirectly. Paying bail can indirectly affect your credit score in the following ways:
Working With A Bail Bonds Company
Bail bond companies assist arrested individuals in getting out of custody faster. You can contact a bondsman and request that he/she post bail on your behalf, then make a repayment plan later. Working with a bail bondsman is the best because, at times, you can only have the amount needed to pay bail upfront. The bail bondsman guarantees the entire amount, allowing you to leave custody faster. In exchange, you must pay the bail bondsman a service fee corresponding to the fixed charging rate. The cost is often 10% of the total bail amount the court asks for. For example, if the bail amount is $50,000, you must pay $5,000 to your bail bondsman.
You have a better chance of preserving your credit score and enjoying regular benefits because of the workable arrangement between you and the bail bondsman. The bail bondsman reduces the financial pressure of posting the bail amount yourself. This makes it less likely that your agreement with the bail bondsman will affect your credit score.
The bail bondsman can also propose a repayment plan to help you prevent financial hardship. Doing this can be vital if the fee is still high based on the corresponding 10% rate used to calculate your cost. You can bargain favorable terms with the bail bondsman rather than posting the total amount and risking your credit score. A weekly, monthly, or quarterly payment plan can be the best. Regardless of the friendly terms, the bail bonds company will be forced to send your name to debt collectors if you fail to keep up with payments. This action can expose you to a bad credit score because you will be listed as a defaulter.
Working with a trusted bail bondsman can be a less risky option for your credit score, but you must observe your court obligations. In this case, you must adhere to court attendance regulations to prevent the bail bondsman from losing their deposit in your name. The bail bondsman can check your court attendance records and remind you to observe the schedule.
Using Your Credit Card To Post Bail
You can decide to pay bail by posting the total amount needed upfront. If so, you can use a credit card, which can have many disadvantages for your credit score. For example, you can use a lot of money depending on the bail amount required for your release. This can significantly increase your credit utilization ratio, potentially impacting your credit score negatively. This sudden imbalance can cause your credit card company to investigate the terminal of your payment, and that can affect your credit card usage in the future. Prospective lenders will consider you a high-risk borrower.
However, registering a high credit utilization ratio is often not an issue, provided you maintain it steadily with prompt debt payment. Unfortunately, you can face increased financial pressure, negatively affecting your access to quality legal services because of the risks related to your changed credit score.
Taking A Loan To Post Bail
Taking out a loan encompasses reaching out to a creditor, especially a bank, to lend you the money you will repay over time. This is a good option to post bail but involves many formalities. For example, you must explain why you need a loan, and some creditors can be apprehensive regarding your recent arrest.
Unfortunately, your loan repayment can be higher than your borrowed amount because interest grows during repayment. An extra fee will also apply based on the creditor you partner with. You risk facing severe penalties like exposure to debt collection procedures if you fail to repay the loan on time. You will have a negative credit score if your record appears on the collection list. This will give you a hard time in the future when trying to obtain loans.
Calculating A Credit Score
The following factors are evaluated when calculating a credit score:
New Credit or Inquiries
Making inquiries with a creditor shows that you have or are almost taking more debt. Having several credit accounts in a short time can also be riskier, particularly for individuals who lack an established credit history. The moment you apply for a new credit line, that application is considered an inquiry or a “hard” hit. There can be several inquiries when you rate shop for a mortgage or a car loan. However, inquiries of this type in any 14-day period will be treated as one brutal hit because you are looking for one loan only.
On the other hand, applying for many credit cards within a short time will be treated as a brutal hit and potentially reduce your credit score. “Soft” hits will not affect your credit score, which includes your personal request for your credit report, requests from creditors to make you “pre-approved” credit offers, and those coming from employers.
Type Of Credit
This involves the “mix” of credit you access, including mortgage loans, finance company accounts, installment loans, retail accounts, and credit cards. It is unnecessary to have each type of account. This factor takes into account the different kinds of credit you have and whether you utilize the credit well. For example, your credit score will be affected if you use a credit card to buy a boat.
Length Of Credit History
This refers to the period you have had and used credit. You will have a good credit score if you have a long history of appropriate credit management. Your credit history will also help your lenders see your repayment pattern. You will be considered good in this area, especially if you have been paying on time every time.
Amounts You Owe Or Credit Utilization
The amount you owe the lenders shows how deep you are in debt and contributes to establishing whether you can handle the money you owe. Your credit score will be affected if you are almost “maxed out” on your credit cards or have high outstanding balances. It is advisable not to exceed 30% of the credit limit on a credit card. Paying a debt in installments is looked upon with favor. For example, you can borrow $20,000 to purchase a vehicle and repay $5,000 of it on time. Your payment pattern will reveal responsible loan management even if you still owe a substantial amount on the initial debt. This will have a positive influence on your credit score.
Your Payment History
The payment record shows how you have been paying your debt. This component constitutes your payments on finance company accounts, mortgages, installment loans like automobile or student loans, retail accounts, and credit cards. Public reports and records detailing items like judgments, liens, suits, foreclosures, bankruptcies, and wage attachments are also considered. A record of timely payments of at least the minimum amount due will have a positive influence on your credit score. Missed or late fees will negatively affect your credit score.
Find A Reliable Bondsman Near Me
There is no direct relationship between bail bonds and credit score. A bail bond is not a loan; thus, there are no significant credit implications of bail bonds. However, you can experience the financial impact of bail and even an indirect effect on your credit score depending on how you pay the bail bond premium. Defaulting on the premium payment can affect your credit score. In addition, obtaining a loan to post bail or using a credit card to pay will also impact your credit score. For detailed guidance on how bail bonds affect your credit score or your financial standing in California, contact the Balboa Bail Bonds. Contact us at 619-760-2222 to speak to one of our attorneys.