Common Credit Mistakes Young Adults Make and How to Avoid Them
Building good credit early is one of the smartest financial moves you can make. But let’s be real—credit can be confusing, and making mistakes is easy. The problem? Even small missteps can follow you for years, making it harder to get approved for an apartment, a car loan, or even a job.
Imagine you forget to pay your credit card bill one month. Suddenly, your score drops, your interest rate climbs, and that dream apartment you were eyeing? It just slipped out of reach. The good news? These mistakes are avoidable.
Don’t stress—we’re breaking down the most common credit mistakes young adults make and, more importantly, how to avoid them.
Most Common Credit Mistakes Young Adults Make
Late or Missed Payments
Paying your credit card bill late or missing a payment is one of the fastest ways to damage your credit score. Even a single late payment can cause your score to drop significantly and remain on your credit report for years.
Setting up automatic payments, calendar reminders, or even requesting a grace period from your credit issuer can help ensure you never miss a due date. Think of it like setting an alarm for an important deadline—you wouldn’t forget something that impacts your future, right?
Maxing Out Credit Cards
Ever gone on a spending spree only to regret it when the bill arrives? Maxing out your credit cards doesn’t just hurt your bank account—it tanks your credit score, too.
Credit utilization, or how much of your available credit you're using, is a critical factor in your credit score. If you consistently max out your credit cards, it signals to lenders that you might be financially overextended. Keeping your utilization below 30%, paying down balances before the statement closes, and requesting a credit limit increase can all help maintain a strong credit profile.
Closing Old Credit Accounts Too Soon
Closing a credit card might seem like a responsible move, but it can actually harm your credit score.
Closing an account reduces your total available credit, which increases your credit utilization ratio. It also shortens your credit history, another key component of your score. Instead of closing old accounts, consider keeping them open with occasional small purchases. A better approach? Use that old card for a small recurring payment, like a subscription, and pay it off in full each month.
Applying for Too Many Credit Cards at Once
Each time you apply for a new credit card, a hard inquiry is added to your credit report. Multiple inquiries in a short period can lower your score and make you appear risky to lenders.
Instead, apply for credit cards selectively. Research qualification requirements beforehand, and use pre-qualification tools to check eligibility without affecting your credit. Applying for a credit card to build credit should be strategic, not impulsive.
Paying Only the Minimum Balance
It’s easy to think, “I’ll just pay the minimum this month and catch up later.” But paying only the minimum on your credit card keeps your account in good standing while costing you significantly in interest over time.
The longer you carry a balance, the more you’ll pay in interest. Whenever possible, pay your full statement balance each month. If that’s not feasible, aim to pay more than the minimum to reduce interest costs and keep your debt from snowballing.
How to Fix Credit Mistakes and Improve Your Score
Check Your Credit Report Regularly
Mistakes on your credit report can drag down your score, so reviewing it regularly is essential. You’re entitled to a free credit report once a year from each of the three major credit bureaus at Annual Credit Report.
Look for errors such as incorrect late payments or accounts you don’t recognize, and dispute any inaccuracies immediately. Many people don’t realize that simple reporting errors can cost them points, so staying vigilant can save you money in the long run.
Smart Credit Card Usage Tips
Using credit cards responsibly can help build your credit while also providing perks like rewards and cashback. Treat your credit card like a debit card—only spend what you can afford to pay off. Take advantage of rewards programs, but always ensure you’re paying off balances in full to avoid unnecessary interest charges. Regularly reviewing statements can also help you spot fraudulent charges early, protecting your hard-earned money.
Choosing the Right Credit Card to Avoid Mistakes
What Type of Credit Card Should You Shop For?
The best credit card for you depends on your financial habits and goals. If you're just starting out, a secured card or credit-building card with no annual fee is a great choice. For those who want perks, a cashback or travel rewards card might be the right fit. If you tend to carry a balance, a low-interest credit card can help you save on finance charges.
If you’re just starting to build credit, you need a credit card to build credit that sets you up for success without the risks. That’s exactly what the Step Visa Card does—no interest, no hidden fees, and a way to start strong. Download our Step Credit Building App on Google Play.
Smart Credit Habits for a Better Financial Future
Your credit score is one of the most powerful financial tools you have—it can save you thousands in interest or cost you big if not managed properly. But the good news is that credit isn’t about being perfect—it’s about building smart habits over time.
By avoiding common mistakes like late payments, high credit utilization, and only paying the minimum balance, you’ll set yourself up for financial success. The earlier you start making responsible credit decisions, the easier it will be to achieve your goals—whether that’s renting your first apartment, getting approved for a car loan, or securing a lower interest rate on future borrowing.
If you’re looking for a credit card to build credit responsibly, the Step Visa Card is a great option. As a leading credit building app, Step offers a simple way for young adults to start building their credit without the risks of traditional credit cards. Sign up today and take control of your credit future!
