Life gets busy, and it’s often hard to keep track of all the things that need doing, like monitoring finances and paying the bills. This becomes especially true in a pandemic. In light of the recent times, banks and lenders have been inundated with requests for payment deferrals on mortgages, credit cards, and car loans.

If you have taken temporary measures to reduce your monthly expenses with a deferral, it should not impact your credit score. However, there is a chance that lenders could incorrectly report it as a missed or late payment, which can account for up to 35% of your credit score. Monitoring your report is critical to ensuring errors are caught early to avoid negative impacts on your credit score.

Even when times are tough, there are measures you can take to build positive credit habits and things you can do to ensure your credit score doesn’t take a nosedive.

Why would my credit score drop?

Credit scores fluctuate so it’s important to monitor it. If yours drops from time to time, just take a deep breath and have a look at a few reasons why it might have happened:

You applied for a credit card or loan recently;
You made a large purchase;
You missed a payment or made a late payment;
Your credit limit was lowered;
You closed a credit card account;
Someone for whom you’ve cosigned a loan missed a payment;
There was an error on your credit report.

Not sure where you stand? You can check your credit report for free anytime, with the Toronto based company, Borrowell. The whole process is quick and online and doesn’t have any impact on your score.

Here are some tips that might help you to save your credit score and build credit quickly:

When you apply for a credit card or a loan, the lender will tap into your credit history via a major credit bureau like Equifax or Transunion. These are called “hard inquiries.” Unfortunately, when they do that, your credit score drops a few points. There is nothing you can really do about it if you want to apply for credit. Just don’t apply for too many loans or cards in the space of a short time.

Buying something expensive can affect your credit utilization ratio which is the amount of credit you’ve utilized divided by the total amount of credit you have to use. It’s recommended to keep that below 30%. Your credit utilization is lowered when you pay off your credit card balances every month. If your credit card copy offers to increase your limit, it might be a good idea to accept as it increases your credit limit (thereby lowering your utilization).

Any payment that is 30 or more days late is going to affect your credit score. If you’re late between 60-90 days, that’s going to be even tougher on your score. If your debt goes into collections, it will stay on your report for seven years which is disastrous to your credit score. Firstly, make a payment on the one you missed as soon as possible. After you’ve brought your account up to speed, your credit score will start to increase. If you’re having a problem meeting monthly payments, you could potentially apply for a deferral program, just make sure you’re aware of the costs.

If your credit limit was reduced while there was still a balance on your card, it might also impact your credit utilization ratio. The best way to combat this is to pay off the balance of the card, or much of it as you can, to get your utilization down. If you don’t know why your limit was lowered, call the issuer of the card to get the details.

Your credit utilization ratio can also be affected when you close a credit card account. Also, if you close an account on a card that you’ve been using for years, it affects your credit history which, in turn, will affect your credit score. Try to keep accounts on old cards open. If you really must close an account, close the one that’s the newest.

If the person for whom you cosigned a loan or credit card misses a payment, it may affect your credit score as well. You might have to take matters into your own hands and schedule reminders for this person to make his or her payments on time. Talk to them and let them know your score is affected when they don’t make payments on time.

It’s not very common to have mistakes on a credit report, but if you do find one or query something on your report, you can challenge the information from the credit bureau that provided it. Dispute letters can be submitted online or via snail mail.

The good news is, if you have a low credit score, even small changes over time can lead to positive impacts. Some analysts say you could even increase it by as much as 100 points in a relatively short time span. With continued work and commitment to positive financial habits, you will have a better chance of getting the best terms on credit products like credit cards, mortgages, or loans.