Yahoo Finance Don’t make the credit card mistake Ryan Lochte just made
According to New York magazine, Olympic swimmer Ryan Lochte just got his first credit card at the ripe age of 32. Though he’s rich in gold, silver, and bronze, the swimmer had yet to score a credit card — until now.
For most people, waiting to get a credit card until age 32 isn’t a smart move. If you don’t have any history with credit, you likely won’t have a credit score or report at all, which means there’s no evidence that you pay your debts. This discourages banks from lending to you, and if they do lend, you’ll pay way more interest.
You can build credit and show you’re a trustworthy borrower if you get a credit card, don’t spend more than 30% of the limit, and pay it off every month. While it may not matter now, it can pay off in a big way if you ever have to get a major loan like a mortgage, as a good credit score can yield far better interest rates—potentially saving you many tens of thousands. Furthermore, a credit card also allows you to earn miles or cash back, as long as you don’t change your spending habits to earn more rewards.
But perhaps Lochte was onto something by not having one. While a credit card is a useful tool for building up credit, it’s also an effective way to destroy it if you fail to pay off the balance every month.
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And Lochte may not be the most responsible cardholder based on the Brazil fiasco in which Lochte lied about being robbed by people posing as police — costing him almost all his sponsors, except for at least one. Of course, the millions he’s already earned in endorsements give him some padding should he fail to pay off all his purchases at TopShop.
If you don’t share Lochte’s millions but do share a blank credit history, you should be able to get a credit card if you have a salary. But if you don’t, you can still get a credit card to build up history by securing it against a CD in a product called a “secured credit card.” After proving you’re good for the money with, say, a year of good payment history, the lending bank will release the funds back to you.
Alternately, you can also ask your parents to open a credit card with you, getting a boost from their credit history to begin your own. And if really don’t want to deal with a credit card but want to build credit history, you can use student or auto loan payments to prove creditworthiness.
We’ve reached out to Lochte to find out what kind of card he has and will update accordingly.
Ethan Wolff-Mann is a writer at Yahoo Finance focusing on consumerism, tech, and personal finance. Follow him on Twitter @ewolffmann.
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