What I Wish I Knew About Credit Scores in My 20s

Published: June 10, 2023

Young adult reviewing credit score on laptop

Looking back at my financial journey, there are so many things I wish I understood about credit scores when I was in my 20s. Credit scores seem simple on the surface, but they have long-lasting impacts on your financial life. Here are the most important lessons I've learned the hard way.

1. Your Credit Score Affects More Than Just Loans

I used to think credit scores only mattered when applying for credit cards or loans. But in reality, your credit score can affect:

Apartment rental applications
Car insurance rates
Job opportunities (some employers check credit)
Utility deposits
Cell phone contracts

Pro Tip: Even if you're not planning to take out a loan soon, maintaining good credit can save you money in many areas of life.

2. Small Mistakes Can Have Long-Term Consequences

One late payment might not seem like a big deal, but it can stay on your credit report for up to seven years. I learned this the hard way when a forgotten $25 payment from college came back to haunt me when I was trying to buy my first car.

3. Credit Utilization Matters More Than You Think

I used to max out my credit cards thinking "I'll pay it off eventually." What I didn't realize was that using more than 30% of your available credit (and ideally less than 10%) can significantly hurt your score, even if you pay it off every month.

4. Closing Old Accounts Can Hurt Your Score

When I got my first "adult" credit card with better rewards, I closed my old student credit card. Big mistake! Length of credit history accounts for 15% of your score. That old account was helping my average account age.

5. Checking Your Own Credit Doesn't Hurt Your Score

Person checking credit score on smartphone

I avoided checking my credit for years because I thought it would lower my score. Turns out, checking your own credit is a "soft inquiry" that doesn't affect your score at all. You can check your credit reports for free at AnnualCreditReport.com.

6. Building Credit Takes Time

There's no quick fix for bad credit or shortcut to excellent credit. The best time to start building credit was yesterday; the second-best time is today. Even if you don't need credit now, establishing good habits pays off later.

Action Step: If you're just starting out, consider a secured credit card or becoming an authorized user on a family member's account to begin building credit.

7. Credit Scores Are Not All Created Equal

There are multiple credit scoring models (FICO, VantageScore), and lenders might use different versions. Don't panic if the score you see varies between sources - focus on the general range (poor, fair, good, excellent).

8. Student Loans Count From Day One

I didn't realize my student loans were affecting my credit while I was still in school. Even if payments are deferred, the accounts appear on your credit report. Making small payments during school can help build positive payment history.

Final Thoughts

Your credit score is like a financial report card that follows you through life. The habits you establish in your 20s can set you up for financial success or create unnecessary obstacles. The good news? It's never too late to start building good credit habits.

What credit lessons have you learned the hard way? Share your experiences in the comments below!