How much do you really know about credit cards and scores? Click through for a full guide!

Awkward confession: I didn’t know what a credit score was until I was in my twenties. All I’d ever been told was that credit cards were bad and ruined people’s lives. (I’m not exaggerating.)

Hey, I’d seen Confessions of a Shopaholic, I knew that credit cards could create some seriously scary debt! What I didn’t know was that understanding how credit cards work and how to use them could teach me practices that would leave me feeling empowered regarding the management of my finances. (Not to mention that learning this stuff can land you clearance on a nice apartment, a lower interest rate on your car loan, and awesome perks like frequent flier miles and cash back.) Don’t believe the myths that people sold me. Read on and get the facts!

One of the most important things to grasp about credit is your credit score. It’s essentially a scale to show lenders how responsible you are. Think of it as a grown up report card. Remember when Mom and Dad would give you your allowance in advance (and maybe a little extra) if you got an A? Your credit score works the same way.

A good score will get you a higher credit limit, lower interest, and more perks, whereas a poor credit score will cause potential lenders to turn you down, and the ones who don’t turn you down will slap you with a monstrous interest fee. Here’s a nifty infographic to help you understand the system.

Credit Cards and Scores for the Clueless Twenty-Something

Myth: In order to maintain a good credit score all you need to do is make the minimum payment every month.

From the credit company’s perspective the minimum payment has one function: lulling you into a false sense of responsibility so that you rack up debt. The more debt you have on a card, the more you owe them in interest. Only making the minimum payment each month will get you in trouble and your credit score will drop. However, not making the minimum payment at all will drop your score even more dramatically and will contribute to long lasting damage with your credit company.

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The best possible thing you can do for your credit score is to ignore the minimum payment and simply pay off your entire balance each month. Better yet, make two payments: One on the 10th and one on the 25th. (Modify these dates if the deadline for your payments is not at the end of the month.) This way you keep your balance low, you won’t scare yourself with a huge payment at the end of the month, you come across as a responsible credit user, and you’ll never need to pay interest again.

Myth: It’s better for your credit score if you don’t open many (or any) credit lines.

Since a credit score rates your borrowing reliability, not using any credit gives you zero credibility. You won’t have a bad score because you won’t have a score at all, and thus are not considered a dependable borrower. To use that school example again, if you don’t show up for the test you can’t get an A!

However, use temperance and prudence when signing up for new cards. If you’ve never had a credit card before, then signing up for three store cards plus a frequent flier card won’t do you any favors.

Start out with a low interest, beginner-friendly card that also provides your credit score for free. Practice the tips in this article, learn how to use credit responsibly, then sign up for the Angel card. Avoid extremes: no credit is a bad thing, but so is opening a card at every boutique in the mall.

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Myth: If you have a bad credit score it’s best to close all your cards immediately.

Closing five cards in two weeks because of a low credit score is like running from an angry dog: It makes sense as a gut reaction but will ultimately end badly. It’s not that credit companies can smell fear, rather, the cancellation of a credit account will raise your debt-to-credit ratio, negatively affecting your score.

If you feel overwhelmed in debt though, there is a right way to close your unnecessary accounts. Before closing an account you must pay off the entire balance and resolve any issues related to the account such as disputed charges. Once you have ironed out any issues or debt, you must carefully decide which card(s) to close. One of the highest contributing factors to a good credit score is the age of the account. Like wine, the older the better. As with other factors, it reinforces the idea of being a reliable borrower, so try to close only newer cards unless absolutely necessary.

Myth: You can only check your credit score once a year.

Don’t bother paying for a bi-monthly credit check. More and more credit companies are now offering a free monthly update on your FICO score simply for being a member.

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Myth: As long as you pay off your balance by the end of the month you can spend as much as you want.

The attitude of “What can I get away with?” is never a good way to approach credit. That being said, you should utilize your credit, since not using credit at all is an extreme that should be avoided. Luckily there is a hard and fast “rule” for how much credit should be utilized on your accounts at one time. The general consensus is that you should use a minimum of 10% of your total credit and a maximum of 30%. So if you have a credit line of $1000, aim to spend between $100 and $300 a month.

Learning to manage your credit is a life skill that will always pay off. Do you have any tips that have proven handy? Share them in the comments!