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5 Credit Myths You Should Unlearn in Your 20s (2025 Edition)
December 12, 2024
Entering your 20s means stepping into the world of credit cards, credit scores, and lots of advice – not all of it true. In fact, a recent study found that about 67% of Americans believe at least one common credit myth. Yikes! Let’s make sure you’re not one of them. Below, we debunk five major credit myths that young adults often hear. It’s 2025, time to ditch these outdated ideas and manage your credit with facts, not fiction.
Myth 1: “Carrying a Small Balance Helps Your Credit Score”
The myth: You might have heard, “Don’t pay off your card completely; leave a little balance so the credit bureau sees you’re using credit.” Supposedly, this boosts your score.
Reality: Carrying a balance does not help your credit score – and it will cost you money in interest. Credit experts have busted this myth repeatedly. Your credit score benefits just as much from on-time payments of a full balance. In fact, the scoring models prefer to see you use credit and then pay it off. There’s zero advantage to paying interest when you don’t have to.
Think about it: if you charged $500 and pay it in full, your utilization is low and you pay no interest. If you leave, say, $50 unpaid, your utilization is slightly higher and you’ll get hit with interest on that $50 – for no benefit to your score. Spoiler: The credit bureaus don’t give gold stars for donating extra money to credit card companies.
2025 Tip: Interest rates are high right now (the average credit card APR is around 20-22%). Carrying a balance means paying hefty interest – which hurts your wallet without helping your credit. Pay in full, keep your hard-earned cash.
Myth 2: “Checking Your Credit Score Will Lower It”
The myth: “Don’t check your own credit – it’ll ding your score.” This myth has scared many young people away from monitoring their credit.
Reality: Good news – checking your own credit score or report will NOT hurt your score. When you check your score through a service or get your free credit report, it’s considered a “soft inquiry,” which has no impact on your credit. Only “hard inquiries” (like when a lender checks your credit for a loan or credit card application) can cause a slight temporary dip.
Staying on top of your credit is actually a smart habit to start in your 20s. You can request a free credit report from each bureau annually via AnnualCreditReport.com (that’s mandated by law). Regularly reviewing your credit report helps you catch errors or fraud early – and as noted, it doesn’t affect your score. So go ahead and be nosy about your own credit. Knowledge is power, and in this case it’s consequence-free.
If managing a credit card still sounds daunting, consider using tools to help. For example, Kudos is a smart browser extension and app that can act as your financial sidekick – it stores all your cards, helps you pick the best one for each purchase (maximizing rewards), and even monitors your credit score as you build credit. In other words, you don’t have to go it alone. Using tech can make responsible credit usage in your 20s much easier and stress-free.
Myth 3: “Closing Old Credit Cards Will Boost Your Score”
The myth: “I don’t use this credit card anymore, I should close it to improve my credit.” Some believe that having fewer accounts is viewed as “cleaner” or that closing a card might remove negative history.
Reality: Closing a credit card usually won’t help your score and can actually hurt it in two ways:
- Credit history length: Your old accounts contribute to the average age of your credit history. If you close your oldest card, your average account age may drop (though closed accounts can stay on your report for years, mitigating this somewhat).
- Credit utilization: This is the big one. When you close a card, you lose that card’s credit limit. Your overall available credit shrinks, so your credit utilization ratio (balances-to-limit percentage) can jump up. A higher utilization ratio can ding your score.
Unless a card has an annual fee you truly can’t justify or it’s causing some other issue, consider keeping it open – perhaps put a small recurring charge on it and pay it off, to keep it active. There’s no prize for having fewer accounts. In fact, folks with excellent credit often have multiple cards (some they’ve held for many years).
Example: You have two cards: Card A with a $1,000 limit and Card B with a $2,000 limit, total $3,000 available. Suppose you usually carry about $600 in combined charges each month before paying in full (good!). That’s 20% utilization. If you close Card B ($2,000 limit gone), now you have $600 out of $1,000 used = 60% utilization – a big spike that could hurt your score.
Bottom line: Don’t randomly close old cards. Keeping them (with a $0 balance) is usually better for your credit score health.
Myth 4: “You Need to Go into Debt to Build Credit”
The myth: “I’ve never had debt, so I can’t have a good credit score. Maybe I should take out a loan or carry debt to show credit activity.” This myth pushes the idea that you must owe money over time to prove you can handle credit.
Reality: You do not need to carry debt or pay interest to build a great credit score. You do need to use credit in some form, but that can simply mean putting small purchases on a credit card and paying it off monthly. The idea is to show a history of on-time payments – you can achieve that with a credit card paid in full, not just loans.
For example, using a starter credit card for groceries and paying the bill on time builds credit history just fine. There’s no requirement to be in debt. In fact, as myth #1 explained, carrying debt when you don’t have to will cost you money and not improve your score.
If you have no credit history at all (common for folks in their early 20s), you can start with products like a secured credit card or a student credit card. These are designed to help you establish credit from scratch without going into elaborate debt. Charge a small expense, pay it off, repeat. Over time, you’ll build credit without ever paying interest beyond maybe a nominal annual fee on the card.
A person with a credit card who pays their monthly bill in full and on time will carry no debt month-to-month, pay 0% interest, and still build excellent credit. It’s about good habits, not carrying debt. So if anyone tells you to take out a needless loan to “have a credit mix” or to not pay off your whole card balance, you have our permission to ignore that advice.
Myth 5: “Credit Cards Are a Trap – It’s Safer to Avoid Them Entirely”
The myth: Some folks (maybe even parents or TikTok influencers) might warn you: “Credit cards will just get you into trouble. You’re better off only using debit or cash in your 20s.” The fear of getting into debt leads many young adults to think avoiding credit cards altogether is the smart move.
Reality: Used responsibly, credit cards are a powerful tool, not a trap. The real issue is not the card itself, but how you use it. If you spend within your means and pay on time, a credit card works in your favor by building your credit profile and often earning you rewards (cash back, points, etc.). By avoiding credit cards entirely, you miss out on these benefits and delay building credit history. Then later, when you want a car loan or mortgage, you might struggle to qualify or get stuck with higher interest rates due to a thin credit file.
It’s true that credit cards can lead to debt if misused. But that’s why learning to use them responsibly in your 20s is so valuable. Think of a credit card like a power tool: in the right hands it builds something great; in the wrong hands, someone could get hurt. We’re here to make sure you’re using it the right way.
Why not just stick to debit? Debit cards don’t affect your credit at all. They also lack many protections and perks credit cards have. For instance, credit cards often come with fraud protection (limited liability if someone steals your card), purchase protection, and the aforementioned rewards. Debit is basically cash from your account – once it’s gone, it’s gone, and it doesn’t report to credit bureaus.
So rather than fearing credit cards, educate yourself (you’re doing that now!) and maybe start with one low-limit card. Treat it like a debit card (spend only what you have), and pay the bill in full. You’ll build a positive credit history and likely score some cash back or points along the way. That’s not a trap; that’s just savvy personal finance.
FAQs
Does carrying a credit card balance improve your credit?
No – carrying a balance does not boost your credit score. This is a persistent myth. Whether you carry $1 or $1,000 forward, it doesn’t help your score at all. In fact, paying in full is better for your score and your wallet (you avoid interest charges).
Will checking my credit score hurt my credit?
No. Checking your own credit score or credit report is a “soft inquiry” and won’t affect your score. It’s smart to monitor your credit regularly – you can do so for free without any damage to your credit.
Should I close a credit card I don’t use?
Generally, no. Closing a credit card can shorten your credit history and raise your credit utilization, which may lower your score. If it has no annual fee, it’s usually best to keep it open (perhaps use it occasionally for a small purchase and pay it off) to maintain a longer credit history.
Can I build credit in my 20s without going into debt?
Absolutely. You can build credit by using a credit card for small purchases and paying the bill in full each month. You don’t need to carry debt or pay interest to establish a good score. The key is showing consistent, on-time payments – no debt required.
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