Credit cards get white-hot with use this time of year, and come January way too many people will be suffering a debt hangover from the spending spree. Long after the fun is forgotten a menacing presence will remain; the credit score. It lurks in records rarely seen, and its menacing whisper to banks, creditors, employers, and who-knows-who else can damage or destroy your reputation. The formulas used by credit agencies are secret and unfathomable, and no law requires them to justify the numbers despite the enormous weight they carry. It may not be too late to protect yourself, or possibly mitigate some of the damage already done.

Credit scores range from 300 (deadbeat) to 850 (buy whatever you want). The three major credit agencies can assign individual scores so the numbers may vary a little. At the top of the credit heap are the 50 million Americans with scores of 785 and above. Lenders smile warmly when they enter the room. So how does one reach the great credit mountaintop? Keep the revolving balance low, always pay on time even if it’s just the minimum, and never “max out” a card. These people are far from debt-free; they owe an average of $8,500. They are beloved because they haven’t been late with a payment in four years or more, and less than 1 percent are past due on their accounts.

Some other secrets of good credit: Use as little revolving credit as possible. These golden score-owners tap only about 7 percent of their available balance. A nice, long credit history – 10 years or more – tells the rating agencies that you are trustworthy. Now, here comes the paradox. People with high credit ratings are extraordinarily credit-worthy and can easily be approved for credit cards, loans, car leases, mortgages and so forth. But to keep that score up in the clouds, you should rarely, if ever, open a new credit account. In other words, you will have great credit as long as you don’t use it.

Federal law entitles everyone to a free copy of their credit report, and it is a very good idea to get them regardless of how painful the truth might be. Creditors can challenge the credit scores and, if there is a solid factual basis and the rating agency feels like doing it, the score may be revised. Adding an explanatory note to the report, as some people try to do, will probably be ignored by lenders. Only the number counts. So, with this information in mind, spend wisely, use cash when possible, and get professional assistance if the pool of debt gets too deep.

Source: New York Times, “Secrets of high credit scorers “Ann Carrns, Nov. 6, 2012