This article is written by me with support from Capital One in conjunction with the release of the brand new Capital One Platinum MasterCard Credit Confidence survey. Check out the results below! All opinions are my own. 

A quarter of Millennials say building a great credit score is one of the scariest milestones they will take on now

– scarier than asking for a raise or talking money with their significant other, according to the Capital One Platinum MasterCard Credit Confidence survey.

This credit confidence gap isn’t too surprising, considering what many Millennials face with the reality of their finances, including record student loan debt, weak wage growth and ever-rising costs of living.

But not all financial realities are daunting – not even for Millennials.

In fact, credit is one of the best tools available to Millennials working to overcome the less than ideal circumstances of their early adulthood. After all, good credit can open up opportunities like student loan refinancing at better interest rates and potentially easier approval for that first studio apartment post-grad.

With the many benefits of good credit, why are so many Millennials fearful?

Possibly because the prevailing model of financial education consists of little more than one generation passing along its’ misconceptions and misinformation about money down to the next, leaving many overwhelmed, real-world bound 20-somethings with a lot of unnecessary fear – money and credit myths included.

In order to avoid the potentially costly consequences of these common misconceptions, we’re debunking some of the worst credit myths and offering our top tips to build the credit confidence you need to succeed.

 

Credit Myth #1: Using Debit Cards Will Help Build Your Credit Score

 

Debit cards don’t build credit because they themselves are not a form of credit.

Credit, by definition, is a measure of how well you borrow money. With a debit card, you’re not borrowing anything – you’re using money from a linked account to make a purchase. Because a debit card doesn’t represent a loan in any way, your debit activity isn’t reported to the credit bureaus and use of a debit card doesn’t build your credit score.

 

Credit Confidence Tip: To build good credit, show that you can use credit responsibly – a credit card is a good tool for doing this. Start with a card that doesn’t charge an annual fee and use it responsibly. A great option is the Capital One Platinum MasterCard that offers no fee, helpful alerts and the opportunity to build a positive credit history. You can learn more about the difference between debit and credit here.

 

Credit Myth #2: You Should Carry a Balance On Your Credit Card

 

This may be the most common and arguably the most destructive credit myth I’ve encountered, so let’s clear it up right here…

You are NOT helping your credit by intentionally leaving a balance on your credit card!

When you fail to pay your credit card bill in full, you may wind up paying hefty (and unnecessary) interest on your purchases. Your credit utilization is also likely to increase. And when your balance exceeds more than 30% of your overall credit limit, it further damages your credit score.

Credit Confidence Tip: Pay off your balance on time and in full (if you’re able), every month. Again, credit is ultimately a measure of how well you borrow money. When you pay off your bill on time and in full, it shows future lenders that you’ll pay them back on time and in full too, helping you qualify for the best financing deals.

Look for alerts that help you pay on time and in full, like Capital One email and mobile alerts that send reminders for things like daily balance summaries, low account balance reminders and bill due dates, among others.

 

Credit Myth #3: Credit Cards Are Not for People who Stick to a Budget

 

Assuming it’s always better to pay in cash can prove costly when it comes time to apply for an apartment or ditch the family phone plan for your own line. Without credit history, approval for such seemingly simple things can be hard to come by, so start building your credit history as soon as you’re able to responsibly.

 

Don’t worry, using credit doesn’t mean you have to carry long-term debt – simply pay your balance in full each month to avoid any additional finance charges like late fees or interest charges.

Credit cards also offer additional advantages like mobile apps that help you keep on top of your spending and transactions, better fraud security, extended warranties and travel protection.

 

Credit Confidence Tip: Only use your credit card to make purchases you know you can afford to pay off with your current cash reserves, and then pay off the balance in full each month. If you’re worried about missing a payment, link your checking account directly to your credit card to set up automatic bill pay or take note of payment reminder. Some credit cards, such as the Capital One Platinum MasterCard, even let you pick your payment due date. If this is the case, pick a date close to pay day so you know you’ll have the funds. Learn more about how to budget with a credit card here.

 

Credit Myth #4: Closing Credit Cards Will Increase Your Credit Score

 

Length of credit history is another important factor in calculating your credit score. If you wipe out years of credit history by closing your first credit card for example, you could negatively impact your credit score.

Not only that, each time you close an account, you lower your amount of total available credit, increasing your debt-to-credit ratio which can also hurt your credit score.

Credit Confidence Tip: Especially if they don’t have an annual fee, keep old credit cards open and active with an occasional recurring charge like your gym membership or music streaming subscription that you pay off immediately. This helps keep your credit history long and healthy.

You can also use a free app like CreditWise® from Capital One to learn more about the factors that go into your credit score, and use the simulator to see how your score might change if you take certain actions, including closing or opening accounts.

 

Credit Myth #5: You Can’t Get a Credit Card after Credit Missteps

 

Credit cards are one of the best tools for rebuilding your credit score after a major credit blunder like bankruptcy, foreclosure or a lack of credit history.

If you’ve severely damaged your credit and are looking to rebuild, you may have to start with a secured credit card, which requires an upfront deposit to serve as collateral. Once you’ve shown a stable history of on-time payments, you could graduate to a standard, unsecured credit card and use responsible credit behavior to improve your credit in the long-term.

 

Credit Confidence Tip: Use credit to your advantage, making payments on time and in full. With the Capital One Platinum MasterCard, for example, you can get access to a higher credit line after making your first 5 monthly payments on time.

If you are looking for secured card options, consider cards like the Secured MasterCard from Capital One, which offers no fee and a refundable deposit to open your account.

 

The fact is, as soon as you start trying to live as an independent adult, you’re going to need credit history.

Don’t get stuck settling for anything less than a life on your terms by buying into these credit myths!