Credit Card Myth Busters: What Young People Need to Know About Building (and Keeping) Good Credit

Your credit might seem like a mysterious concept that quietly decides your future—from getting a car to renting your first apartment. Adding to the mystery is the bad advice and myths floating around about how credit really works. 

I’d like to help you separate myths from facts and walk you through some simple, proven steps to start building good credit with confidence. 

MYTH 1: Opening multiple credit cards will ruin your credit 

Truth: Not necessarily! 

When you open a new card, your score might take a small, temporary dip because of a “hard inquiry.” But over time, opening and using cards responsibly can improve your credit by increasing your total available credit—a key factor in your credit utilization ratio (how much of your credit you’re using versus your limit). 

According to the Consumer Financial Protection Bureau (CFPB), keeping your credit utilization under 30 percent is ideal—and the lower, the better. Having more available credit (and not using all of it) can show lenders you manage credit responsibly. 

Takeaway: If you’re ready for a credit card, make sure it’s one you can manage well—one with no annual fee, low interest, and a clear purpose (like building your credit, not funding impulse buys or trips you can’t afford). 

MYTH 2: Closing an old, unused credit card will improve your credit score 

Truth: The opposite can be true. 

Your credit history length makes up about 15 percent of your FICO score, according to Experian. And closing your oldest card can shorten that history. Even if you don’t use an older card often, keeping it open helps lenders see a longer, stable track record. 

Experian advises using the card for a small recurring payment—like a subscription—and setting it on autopay. That way, it stays active without adding extra debt. 

Takeaway: Don’t rush to close old accounts. Longevity matters. Think of your oldest card as your financial best friend that stays loyal over time. 

MYTH 3: You need to carry a balance to build credit 

Truth: You never need to carry a balance. In fact, doing so actually costs you. 

Paying your balance in full each month not only saves you money in interest but also shows lenders you’re dependable. Carrying a balance won’t help your score; it’ll just drain your wallet. 

CNBC confirms that what matters most are on-time payments and responsible credit use. In fact, payment history (which looks at if you pay accounts on time) accounts for 35 percent of your credit score.  

Takeaway: Set up automatic payments or reminders so you never miss a due date. Experian defines a late payment as one that is 30 days past due and even one late payment can hurt your score for up to seven years! 

How Your Credit Impacts Big Life Moves 

Your credit score is like your financial reputation. Our co-founder and CEO Louis Barajas says it’s like your financial report card—and it follows you as you step into adult life.  

There are multiple areas where your credit will impact your life, including:  

• Buying a car. A good credit score can save you thousands. The Federal Reserve notes that borrowers with top credit scores can qualify for auto loan rates 4–6 percent lower than those with poor credit — meaning smaller monthly payments. 

• Renting an apartment. Landlords often check credit to gauge responsibility. A low score could mean a higher deposit or needing a co-signer. 

• Phones and utilities. Many carriers and utility companies check credit before offering contracts or equipment. 

• Getting a job. There are many industries that check your credit when you’re being considered for a job. The financial services industry is one of them. Others include government, IT, and the legal field. Self Magazine reports that bad credit could cost you opportunities in these fields. Note, however, that while pre-employment credit screenings do not include your credit score, they do share your credit accounts—including balances, payment histories, and collection accounts.  

Basically, your credit tells lenders and employers that you are responsible and trustworthy.  

Actionable Steps to Build Credit 

If you’ve just started using credit cards (or you’re thinking about starting), this is the perfect time to build good habits. Here are some things I recommend to do that:  

• Start with one credit card or secured card. If you’re new to credit, consider a secured credit card or becoming an authorized user on a parent’s or mentor’s card (but note this is only helpful if they have good credit). Some of our staff members with good credit have put their kids or nieces and nephews on their credit card as an authorized users so they can start off with good credit.  

• Keep your utilization below 30 percent. If your limit is $1,000, aim to use less than $300 each month—and pay it off in full. Like I wrote above, there is never a need to carry a balance.  

• Automate payments. Late payments are one of the biggest credit killers. Autopay removes the risk.  

• Check your credit report. Visit AnnualCreditReport.com for a free report from each bureau once per year. Look for errors or accounts that are not yours as they can drag your score down unfairly.  

• Be patient and consistent. Credit building takes time — usually 6–12 months to see improvement, and longer to reach excellent credit. 

Final Thoughts 

Building good credit really comes down to being consistent and intentional. Every on-time payment, every responsible swipe, every bill paid in full adds up. 

As you grow into your independence—whether that’s moving out of your parents’ home, buying your first car, or signing your first lease—your credit will be the thing that opens (or closes) doors. Start treating it like an investment in your future self and building good credit early.  

Join me and my colleague Isaac Olivares for our NexGen Wealth Talks, where we’ll talk about how. young people can make smart money moves by building good credit, knowing how mental health impacts finances, and choosing the right bank and account. Register here.