Twenty-three states require high school students to learn about personal finance through a standalone class or part of another class. And across the country, many states now offer some form of financial literacy training in high school or are considering bills to make financial education mandatory for graduation. 

A Capital One Insights Center survey found that Americans held many misconceptions about credit that could harm their financial well-being. Some of those misconceptions are more likely to be held by younger generations–including adults in Generation Z and Millennials–than by older generations.

That may not be surprising given that younger generations may have less experience with credit than older generations, but these findings suggest the need for early financial education.

Five charts about credit beliefs

1. Smaller shares of Generation Z said that they know how to improve their credit score (51%) and feel like they have access to credit (42%), compared with older generations.

What’s more, many misconceptions about credit are more likely to be held by younger generations. 

2. While only 16% of the Silent Generation incorrectly believes that carrying a balance on their credit cards each month is a good way to increase their credit score, more than half (53%) of Generation Z holds this misconception. Carrying a balance each month accrues interest and can lead to higher debt utilization rates, which can lower credit scores.

3. Nearly half of Generation Z (49%) and Millennials (47%) incorrectly believe that credit bureaus are run by the federal government. Meanwhile, only 13% of Baby Boomers and 8% of the Silent Generation believe this misconception. Credit bureaus are not run by the federal government, but they are regulated by federal legislation. 

4. Higher shares of Generation Z (32%) and Millennials (37%) incorrectly believe that once your credit score drops, it cannot be rebuilt. Much smaller shares of older generations hold this misconception. The truth is that credit can be rebuilt, and at any age.

5. A third of Generation Z (33%) and a larger share of Millennials (40%) incorrectly believe that checking their own credit will negatively affect their score. But these soft credit checks do not affect credit scores–and checking your credit is a healthy financial habit. (In comparison, hard credit checks, which occur when consumers apply for credit, can temporarily lower credit scores.)

Despite these findings, several misconceptions were equally held by all five generations, and some incorrect beliefs even declined with each generation. We also found that Generation Z scored better than Millennials on some credit beliefs that matter most for those new to credit. For example, a lower share of Generation Z (31.8%) than Millennials (37.3%) incorrectly believe that avoiding credit cards and loans altogether can improve your credit score. 

Financial literacy is a critical skill for Americans at any age. As more states begin adopting personal finance courses as high school graduation requirements, the hope is that these and other misconceptions fade out with the next generation. 

Methodology

Note: all data in this report is from self-reported, anonymous research of U.S. consumers broadly, not specifically from or about Capital One customers or employees.

The Capital One Insights Center Credit Beliefs Survey is a nationally representative survey of 3,502 randomly selected adults in the United States conducted in July 2022. In the survey, respondents were shown a series of statements about credit and credit scores and asked to rate whether each statement is definitely false, probably false, don’t know, probably true, or definitely true.

Using these responses, we were able to understand whether respondents believed that a statement about credit was true or false (their accuracy), as well as how much confidence they had in their answer. To measure accuracy, we calculated how many respondents correctly identified each statement as true or false. Confidence levels were determined based on whether respondents answered either “definitely true” or ”‘definitely false” on the five-point scale. Combining this with whether the statement was true or false allowed us to understand respondents’ confidence in their correct or incorrect beliefs.

Respondents were also asked about essential elements of the credit system, including the names of major credit bureaus, what the typical credit score is in the United States, and information about their personal credit history and profile.

Our survey sample was representative of the U.S. population across several dimensions. For the purposes of this analysis, we segmented data by credit score groupings, generation/age groups and gender. 

Respondents were asked to choose their age range from a list of options. We then mapped those age ranges to generational ranges as follows: Generation Z (ages 18-24), Millennials (25-44), Generation X (45-54), Baby Boomers (55-74) and Silent Generation (75+). These generational ranges are closely aligned with industry standards set by the Pew Research Center.

Credit score groupings follow the VantageScore Credit Scores ranking system: 781-850 scores are coded as “Excellent,” 661-780 as “Good,” 601-660 as “Fair,” 500-600 as “Poor” and 300-499 as “Very Poor.” Because a smaller number of respondents fell in the “Poor” category, we combined “Poor” and “Very Poor” to ensure the band was statistically significant. We also collected data from respondents with no credit scores. Credit scores are based on the values reported by respondents. 

About the Capital One Insights Center

The Center combines Capital One research and partnerships to produce insights that advance equity and inclusion. As a nascent platform for data and dialogue, the Center strives to help changemakers create an inclusive society, build thriving communities and develop financial tools that enrich lives. The Center draws on Capital One’s deep market expertise and legacy of revolutionizing the credit system through the application of data, information and technology. 

Disclaimer 

This material has been prepared by the Capital One Insights Center, a non-partisan center for objective research and insights, and is provided solely for general information purposes. Unless otherwise specifically stated, any views, analysis or opinions expressed herein are solely those of the Capital One Insight Center’s staff, researchers and listed partners (if applicable) and may differ from the views and opinions expressed by Capital One Financial Corporation, other departments or divisions of Capital One Financial Corporation, or its affiliates and/or subsidiaries (Capital One). Information has been obtained from sources believed to be reliable. 

The data relied on for this report are based on self-reported survey data from anonymous respondents across the U.S. Survey respondents included may or may not have relationships with any number of financial institutions and/or products. Capital One Insights Center does not know, nor is it able to determine, if any of the survey respondents have a relationship with Capital One. Certain information herein is also based on data obtained from third-party sources believed to be reliable. 

Analysis and conclusions constitute the Capital One Insight Center’s judgment as of the date of this report and are subject to change without notice. Furthermore, the analysis and views will not be updated or otherwise revised to reflect information that subsequently becomes available or circumstances existing, or changes occurring, after the date of publication. 

Any opinions expressed herein should not be construed as an individual recommendation for any particular customer or client and is not intended as advice or recommendations of particular securities, financial instruments, market conditions or strategies. Capital One Financial Corporation and its affiliates and/or subsidiaries may issue reports or have opinions that are inconsistent with, and reach different conclusions from, this report.