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When you have strong credit, your franchise's financial future will be stronger, too. You'll also have more options when you need to shop around for lenders for a business loan, and you'll receive better terms. As you prepare to seek financing for your Canadian franchise business, here are some common credit mistakes to avoid.
Not checking your credit report
It's wise to check your credit report annually at the very least so you can spot fraudulent accounts and have any mistakes corrected. You may find minor errors, such as a misspelling of your address, but you could find major mistakes that are harming your credit, such as an account listed that doesn't belong to you.
You are able to get one free credit report per year from the two major bureaus: TransUnion and Equifax. To really stay on top of things, get a report from one bureau first and then wait six months to get the report from the other bureau. If you do find any serious errors, work with the bureau the report belongs to so you can directly to fix the mistakes.
Missing payments or making late ones
Making a late payment or missing one altogether is simply bad for your credit. Even if things are tight, you should always make the minimum payments due on all of your bills. If you have the habit of forgetting to pay things, consider setting up automatic payments to avoid that particular trap.
You may have once heard that having a balance is good for your credit score, but this isn't true. In fact, if you carry high balances, it can hurt your score because it will affect your credit utilization ratio, which is how much credit you have available versus what you owe. This ratio is a factor in your credit score calculations.
Closing old accounts for no reason
While it makes sense to close old credit cards you don't use any more, this may hurt your score. Your credit history is a part of your score, and when you close older cards, it will make your credit history appear shorter than it really is. If possible, keep older cards you are no longer using open. If the old card you want to close has a fee, talk to the card issuer about getting that fee waived, which they may consider if you're a long-time customer.