CSLB Contractor's Law & Business Practice Exam

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What is recommended for a contractor to assess the financial capability of a subcontractor?

Review previous job references
Examine their credit history
Ask for a bank reference
Check their insurance coverage

The correct answer is: Examine their credit history

To assess the financial capability of a subcontractor, examining their credit history is particularly useful as it provides insight into their financial reliability and past performance in managing their financial obligations. A subcontractor's credit history reflects their ability to pay bills, manage debts, and handle financial commitments. This information can help a contractor determine if the subcontractor has a history of financial stability, which is crucial for the successful completion of a project. While reviewing previous job references, asking for a bank reference, and checking insurance coverage can provide valuable information about a subcontractor's overall capabilities and past work quality, these do not directly reflect their financial capability as effectively as a credit history does. Credit history offers a detailed view of a subcontractor's financial conduct, which is vital when considering whether they can fulfill their financial commitments on a project.