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These 11 money myths are still believed by many. It’s time to stop the misinformation and provide legitimate financial tips for young adults! Here are 11 commonly-believed falsehoods about money management.

1. Credit scores are based on paying bills on-time.

While on-time payments do factor into your score, they are not the only factor. Your credit score is established on these five fronts:

• 35% – Payment history
  • This is where on-time payments will help you and late payments will hurt you.
• 30% – Amounts owed
  • How much total debt have you accumulated? How much of your credit limit are you using? Hint: less is better.
• 15% – Length of credit history
  • This section calculates how long you’ve been using credit, and the history of your open and closed accounts.
• 10% – Credit mix in use
  • Lenders like to see a healthy mix of credit, including revolving debt like credit cards and installment debt like auto loans.
• 10% – New credit
  • Are you requesting too many loans within a short period of time? Lenders want to see a substantial amount of time between new accounts.

While making payments on-time will help increase your credit score, there are plenty of other ways to raise your score. Use These 7 Hacks to Repair & Raise Your Credit Score!

2. You should keep your credit limit low.

It can be scary to have access to too much money. If you have a $10,000 credit card limit, do you trust yourself not to spend all of that money? However, sometimes people confuse knowing your personal limitations to what is actually financially healthy in a lender’s eyes. It’s perfectly fine to have high credit limits – as long as you don’t use too much of them.

Keep your credit utilization ratio under 30%. This means you only use 30% of your total credit limit at any given time. If you do have a $10,000 credit card limit, 30% equals $3,000. So, you should try to never have a balance higher than $3,000 on the card.

3. It doesn’t really matter what the interest rate is.

We’ve heard horror stories of inexperienced car buyers accepting insanely high interest rate loans at car dealerships. The interest rate of your loan or credit card could cost you thousands of dollars if you aren’t careful.

For example, say you take out a 60-month auto loan for $20,000 at a 15% interest rate.

Monthly Payment: $475.80 | Total Payment: $28,547.92 | Total Interest: $8,547.92

If you take out the same loan, but get a 5% interest rate, here are your new totals.

Monthly Payment: $377.42 | Total Payment: $22,645.48 | Total Interest: $2,645.48

That’s an almost $6,000 difference! The lesson here is that interest rates are vitally important – so shop around to see if you can get a better one. Do your own calculations on our FREE loan calculator.

4. Once you’re on a repayment plan, you can’t change it.

Not true. If you want to change your loan repayment plan, look into refinancing or consolidating your loans! Refinancing works best if interest rates have dropped, or your credit score has improved and you now qualify for better rates. Consolidation works best if you can get a lower interest rate and don’t plan to add new debt while paying the consolidated debt off.

Read the Beginner’s Guide to Debt Consolidation here.

5. You have to be rich to invest.

When young adults think of investing, they often think of fancy stockbrokers in the New York Stock Exchange. But the truth is that investing is possible for anyone. That 401K your company offers? That’s an investment account. Are you contributing to a private IRA? That’s an investment account. There are now even mobile apps you can use to get started with basic investing! Don’t let the myth of fancy investors dissuade you from starting to make basic investments while you’re young.

6. You must combine your money when you get married.

This 2016 survey stated that 76% of all couples share at least one bank account. When people get married, sometimes they assume that they should combine all of their finances. But this is not a requirement of marriage. In fact, some experts think it’s healthier to keep at least a portion of your individual income separate. There are no requirements, but you should discuss this with your partner before you get married. Pick an option that makes you both feel comfortable and allows you to manage your money effectively.

Here are 16 additional financial questions you should ask a future spouse before marriage.

7. It’s easy to borrow money from your retirement fund.

We cannot emphasize this enough – do NOT take money out of your retirement fund for any reason besides retiring! Not only are you stealing from your own hard-earned money, it can also result in a plethora of early withdrawal penalties and fees. The terms of a 401K or IRA are desirable because they are based on the assumption you won’t be using the money until you reach retirement age. Therefore, there are many penalties and fees involved if you want to access that money before retirement. Accessing your 401K should be a last-ditch option, and only used if you’ve consulted a financial expert.

8. Buying a house is a safe investment for everyone.

It’s the white picket fence American dream. Everyone should aspire to own a home! While buying a house can certainly be a wonderful decision for many people, it’s not the right decision for everyone. The average home does appreciate in value ahead of the normal rate of inflation – but not every home. Don’t buy a home simply because you think it’s a great investment.

Here’s some more reading material that can help you determine if buying a house is the right decision for you.

Buying vs. Renting: Are You Ready to Own a Home?

Don’t Make These 8 Common First Time Home Buyer Mistakes

The Ultimate Guide for First Time Home Buyers

9. You have to put 20% down on a home to buy it.

While it’s certainly true that putting more money down decreases the financial risk involved with buying a home, 20% is not your only option. If you’re able to meet the 20% threshold, you receive benefits like not having to pay extra for mortgage insurance each month. However, many first-time buyers aren’t able to save up so much cash up-front.

Luckily, you have more options that just a 20% down payment. Conventional loan down payments start as low as 5% and FHA-backed loans can go as low as 3.5%. Find out more about each mortgage option here.

10. You should pay off your student loans before you start saving.

Student loans are not the worst type of loan to have. Often, they come with lower interest rates than other types of debt like credit cards, and federal student loans have flexible repayment terms. Instead of focusing all of your efforts on paying off your student loans, consider working on building up an emergency fund first.

We recommend prioritizing an emergency savings account that has 3-6 months of living expenses tucked away for a rainy day. Make your minimum student loan payments while building up these savings. Once you have enough money saved that a $500 car repair won’t ruin you – then you can focus on paying more than your minimum student loan payment.

11. Getting a salaried position automatically means you’re financially healthy.

Many new college graduates are excited when they land a salaried job, and rightfully so! A steady paycheck can help you meet your financial goals. However, just because you can count on a paycheck doesn’t mean you’re managing your money wisely. Make sure if you are a new graduate you read these 11 pieces of financial advice! They will help to tell you if you’re financially healthy, and if not – how to get there.

How many of these myths did you believe?

Our public education system doesn’t do a great job of providing financial education. Many times, it’s up to you to seek out the correct information when it comes to money. If any of your friends and family believe the above myths – share this article with them!