When it's okay to let your credit score slip a little

Perfecting your credit score before applying for a big loan, say for a house or a car, involves a long list of do's and don'ts.

Don't apply for credit cards unnecessarily. Do pay your cards off in full. Don't close your old credit cards. Do check your credit score every couple of weeks.

But what if you already have a car, a house or just don't expect you'll need any more loans in the near future? If you have good credit, should you still be sweating your credit score?

The question came up recently during a chat with readers who wanted guidance on how much they should be watching their credit scores and credit reports in general. One reader asked whether you need to check your credit score constantly if you are not applying for a loan.

As is often the case when it comes to money issues, the answer is: It depends. Your credit can come into play in less obvious ways even if you are not applying for any loans.

But generally speaking, people who have good credit scores and are not planning to apply for credit in the next six months or so may find that it is OK to slip into what some credit experts call "maintenance mode." In other words, you always want to keep your credit in good standing, but you may have some wiggle room where it might be OK if your credit score drops by a few points, they say.

"Consumers might ... have a misconception that [the credit score] affects every corner of their lives, and it really doesn't have that much power," said Sandra Bernardo, manager of consumer education with Experian, one of the three major credit-reporting bureaus.

It comes down to understanding that it's often your credit history, not necessarily your credit score, that may come into play for non-lending decisions.

Take people who are applying for a job. Instead of pulling an applicant's credit score, many employers will request a curated version of their credit report that may be different from the report a lender might see, Bernardo said. In those situations, employers are generally looking to verify a person's work history and to get a sense of whether they pay their bills on time, she said. In many cases, the employers are not looking for perfection but want a sense of whether the applicant has an unusual amount of debt or if they can be trusted in a position that involves handling a lot of money, she said.

Some people may also find that they need to pull a credit report when they apply for an apartment or to open an account with a utility company. While some landlords may request a credit score, many will search an applicant's credit report for potential red flags, such as if that person is severely behind on any debts. One or two late payments may not be a deal breaker.

So what does this maintenance mode look like? For the most part, it is a balancing act that involves keeping up the strong money habits that earned you that strong credit score in the first place. But some of the tips and tricks that people use to maximize their credit scores may no longer be as important.

Space out your credit reports. Because your credit history matters even when you aren't applying for loans, you should always be in the habit of checking your credit report at least three times a year through AnnualCreditReport.com, Bernardo said. You could spread those out and pull one every four months. Scan the report for errors, loans that may have been taken out fraudulently in your name and to make sure that your payment history is accurate, said Sienna Kossman, a spokeswoman for CreditCards.com. It can take weeks or months to clear mistakes from a credit report, so checking them periodically, even in maintenance mode, can keep you from having to scramble when someone does need to see your credit history.

Pay your bills on time. Payment history is the number one factor used to determine a person's credit score, said Bethy Hardeman, chief consumer advocate for Credit Karma. But because many of the companies checking your credit history for non-loan-related reasons will also be looking at your payment history, it's a pretty good idea to keep that track record up, even if you are not applying for a loan. Setting up automatic payments for at least the minimum amount due each month can help you avoid late payment fees, Hardeman said.

Keep balances low - for the most part. If you aren't applying for a loan tomorrow, it may not be so damaging to your credit if your balance creeps higher than usual one month, Hardeman said. It's a situation that even if people with good credit face if they find they might need a little more time to pay off a vacation or major purchases made during the holidays, she said.

Your credit score may take a hit in the short term while you are paying off that balance, but if you bring the balance back down in a few months, then that temporary ding may not hold you back in the long run, Hardeman said. "You can get that back down pretty much immediately and get that back on track during the next credit cycle," she said.

It's OK to go after that reward card. Applying for credit cards and other loans can ding your credit score, which is why it's generally recommended that people who are priming their credit profiles for a major loan avoid other applications. But if you don't have plans for a major loan in your near future, you might have more room to apply for those credit cards you think will offer good rewards, as long as you keep the applications to a minimum, Kossman said.

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