Dave Ramsey and zero credit score?

[jmjj215]

Re: Dave Ramsey and zero credit score?

I'd like to join the minority group as well. You can have the best of both worlds. Sure, the FICO score has been somewhat forced upon us, but we can stick our head in the sand and complain it's a "dumb system" or we can play it right, save money, get a great rate on a 15-year-fixed-mortgage-that's-no-more-than-25%-of-our-take-home, and never carry any revolving debt at all.

The whole credit system seems skewed to encourage people to have payments for everything (house, car, college, braces, TV, dog, new pool, vet bills.....). It fits in nicely with the instant gratification generation.

It's true they want you paying them interest, but you don't have to. Again, you can have the best of both worlds.

Let's remember that Dave fought these exact people he hates now for 2 years before he lost everything. He was sued, sued, sued, foreclosed on, sued, harrassed, etc. by lenders of every sort. He had mounds of debt and hoards of creditors coming after him. I've no doubt they were nasty to him.

This is the (extreme) perspective he is coming from when he gives advice. His situation was extreme (millions in debt) and his perspective his extreme. It always will be. I feel there's a middle ground in there ('best of both worlds') that should be encouraged.

[debtfreesteve]

Re: Dave Ramsey and zero credit score?

My wife & I talked this over last night, about having 1 credit card, to pay for all of our expenses throughout the month, and we agreed to simply not do it.

The $200, $300, $400 extra we 'might' have to pay 'someday' in car insurance rates, would pale in comparison to the extra spending we would do with our credit cards.

When we don't do a cash budget, we use our debit cards now much more frequently, and spend so much more.

It's a proven fact, that people in general spend more with cards, than with cash, and they'll spend more with the blink technology too. Why is it you think McDonald's went to taking Visa, twofold, yes, everyone uses them, and 2. they spent about 20% more than cash customers.

Now, everyone or most everyone here that use their CC's each month, and pay them off, may not be like the rest, and actually don't spend more, however I would at least attempt it for a couple of months to make sure you aren't in that group that spends 12-20% more by using cards.

[parafly]

Re: Dave Ramsey and zero credit score?

My wife & I talked this over last night, about having 1 credit card, to pay for all of our expenses throughout the month, and we agreed to simply not do it.

The $200, $300, $400 extra we 'might' have to pay 'someday' in car insurance rates, would pale in comparison to the extra spending we would do with our credit cards.

When we don't do a cash budget, we use our debit cards now much more frequently, and spend so much more.

It's a proven fact, that people in general spend more with cards, than with cash, and they'll spend more with the blink technology too. Why is it you think McDonald's went to taking Visa, twofold, yes, everyone uses them, and 2. they spent about 20% more than cash customers.

Now, everyone or most everyone here that use their CC's each month, and pay them off, may not be like the rest, and actually don't spend more, however I would at least attempt it for a couple of months to make sure you aren't in that group that spends 12-20% more by using cards.

It should not be a problem for you if you are responsible with your credit. You could, for example, have one credit card and limit its use to once a month. Use it during a routine stop at the grocery store or any other type of common purchase that you make each month. Then simply pay off the entire balance each month, which should not be high because it was only used once.

If you limit your credit card usage to once a month in a responsible fashion, you can have the best of both worlds:

No credit card debt and a high FICO score (just in case)

Just because you have a credit card, doesn't mean you have to use it all the time. In the end, it all comes down to the responsibility of the person, not the possession of a piece of plastic.

[jmjj215]

Re: Dave Ramsey and zero credit score?

I used to use all cash and went to credit card and monitored my spending (still do) very closely and noticed no increase in my spending whatsoever.

[Writer@Large]

Re: Dave Ramsey and zero credit score?

Let's say you drive paid-for cars, you own your home outright, and you don't have a credit card because you have an emergency fund and your debit card works just like a credit card would. And it's been like this for years. FICO would punish this person, score-wise, compared to someone who systematically pays Mastercard or GMAC. Which one is more financially responsible here? It's a messed up system.

Quoted for props . It's a bad system; rolling over and taking is a stupid thing to do. The hegemony of the FICO score has only arisen since the 1990s; in fact, when I entered college in the early 1990s I'd never even HEARD of a "credit score," except in vague terms concerning mortgages in my high school economics class.

Somehow, the FICO score has been hyped into this all-dominating number that tells everyone how good you are as a person. It's ridiculous nonsense. Frankly, if a company is going to make a hiring decision based on how much debt I'm floating, I'm not sure that's a company worth working for. My personal debt has no more to do with my job performance than marital status, my reading habits, or whether or not I smoke.

--W@L

[Writer@Large]

Re: Dave Ramsey and zero credit score?

It seems that Dave Ramsey's plan is for people who absolutely cannot handle debt under any circumstances, not those who use credit wisely.

You sure you don't want to paint with an even broader brush?

--W@L

[sweeps]

Re: Dave Ramsey and zero credit score?

Somehow, the FICO score has been hyped into this all-dominating number that tells everyone how good you are as a person. It's ridiculous nonsense. Frankly, if a company is going to make a hiring decision based on how much debt I'm floating, I'm not sure that's a company worth working for. My personal debt has no more to do with my job performance than marital status, my reading habits, or whether or not I smoke.

I don't know if anyone would necessarily disagree with you on that point, but regardless companies have found a strong correlation between high credit scores and responsible behavior in other areas of one's life. By not playing along you're simply hurting yourself, no one else.

[parafly]

Re: Dave Ramsey and zero credit score?

Somehow, the FICO score has been hyped into this all-dominating number that tells everyone how good you are as a person. It's ridiculous nonsense. Frankly, if a company is going to make a hiring decision based on how much debt I'm floating, I'm not sure that's a company worth working for. My personal debt has no more to do with my job performance than marital status, my reading habits, or whether or not I smoke.

The same can be said about SAT scores for high school students. Colleges use this score to determine whether a student will be able to handle their curriculum, and it has been widely accepted as the standard to make such evaluations.

Having something against FICO scores is perfectly fine, but you should realize that it is quickly becoming the standard for evaluating a person's financial responsibility. Many organizations have concluded that this measure of financial responsibility has a strong correlation to the personal character of a specific person.

Trying to ignore your FICO scores equates to a high school student ignoring their SAT score. Can a student get into college without an SAT score? Of course, but the student's possibilities become very limited and he/she is only hurting themselves. Sometimes you have to just bite the bullet, and go along with the common standards if you don't want to fall behind.

[Saluki96]

Re: Dave Ramsey and zero credit score?

I certainly don't like what the FICO system has become. But I guess I am in the minority as well. After trying several different methods to track spending and budgeting, the last several months we have used our rewards credit card. You have to be disciplined. I monitor spending and I have a cap on what the bill can be at the end of the cycle. I update the wife often on what the status is and check the account almost daily. We did the cash/debit card thing for a couple months, but it just wasn't working. Even while using MS Money. I have ATM withdrawls, but what was the cash used for? Now I download the statements and break them down in excel based on type. It's something I can print off and we can go over it together and see what needs to be cut. Then we can adjust and learn. Obviously this is not for everyone, like I said, I have tired several methods, and we are still adjusting certain things.
Like others have posted, having a zero score might not be a big deal if you are loaded. But for us, we both have good scores and just a mortgage and one car financed. Again it's all based on your situation and what works for you. I don't have any problem with DR's methods. It worked for him and he's helped others.

[Writer@Large]

Re: Dave Ramsey and zero credit score?

The same can be said about SAT scores for high school students. Colleges use this score to determine whether a student will be able to handle their curriculum, and it has been widely accepted as the standard to make such evaluations.

False analogy. SAT scores are at least an indication of a student's academic ability (as are ACT scores, COMPASS scores, state tests like Michigan's MEAP, etc.). Standardized testing is far from perfect, but at least there's a correlation between it and the thing it's being measured against (academic ability as predictor of academic performance).

Having something against FICO scores is perfectly fine, but you should realize that it is quickly becoming the standard for evaluating a person's financial responsibility.

At least, that is, until VantageScore comes out. Then it's anybody's guess which will become the "standard." Or maybe we'll have two "standards" to measure ourselves by. We'll certainly have twice the work in keeping track of the accurracy of our reports! Twice the errors, twice the fun ...

--W@L

[parafly]

Re: Dave Ramsey and zero credit score?

False analogy. SAT scores are at least an indication of a student's academic ability (as are ACT scores, COMPASS scores, state tests like Michigan's MEAP, etc.). Standardized testing is far from perfect, but at least there's a correlation between it and the thing it's being measured against (academic ability as predictor of academic performance).


At least, that is, until VantageScore comes out. Then it's anybody's guess which will become the "standard." Or maybe we'll have two "standards" to measure ourselves by. We'll certainly have twice the work in keeping track of the accurracy of our reports! Twice the errors, twice the fun ...

--W@L

I don't think it's a false analogy. A FICO score is an indication of an individual's financial responsibility, at least in most cases. The only people falsely affected by a negative FICO score are those who are loaded and have not had any open lines of credit for a long time.

The FICO score, like standardized testing, is far from perfect. But, to say that there is absolutely no correlation between the FICO score and financial responsibility is ignorant. For the vast majority of the adult population, it is a great indicator.

I've never heard of VantageScore, but it sounds interesting. Do you have any more info about it?

[Writer@Large]

Re: Dave Ramsey and zero credit score?

I think Writer@Large was referring to the FICO score's use in insurance, employment, and other places.

What he said. I have no problem, on the face of it, with FICO as an indicator of finacial responsibility. But I find it laughable that someone can be SO well off that they have no FICO score, and be punished for it. What a lazy underwriter or loan officer that must be, who's willing to look at one number but not a person's whole financial profile!

I've never heard of VantageScore, but it sounds interesting. Do you have any more info about it?

What's the policy on links on these boards? I know I had one deleted in my opening post, but as these are informational ...

VantageScore

Do you need a new credit score?

A discussion from my weblog with details

Basically, the three largest credit score companies are tired of paying Fair Issac for scores, so they've colluded to create their own system (which uses a new, higher-numbered system). But they won't be sharing SCORES, just the SCORING ALGORHYTHM, so it's going to be just a varied and useless as your credit score tends to be now between companies.

Oh, and there'll still be institutions out there using FICO. Wheeeee!

--W@L

[jmjj215]

Re: Dave Ramsey and zero credit score?

But I find it laughable that someone can be SO well off that they have no FICO score, and be punished for it.

If they're so well off they wouldn't be needing their FICO score - right? So it's not really a punishment.

[Writer@Large]

Re: Dave Ramsey and zero credit score?

If they're so well off they wouldn't be needing their FICO score - right? So it's not really a punishment.

"Well-off" doesn't mean "rich." If I'm making $50,000 a year and am debt-free, I'd consider myself well-off. Doesn't mean I could buy a new house for cash, though.

--W@L

[jmjj215]

Re: Dave Ramsey and zero credit score?

I was referring to the post that said something along the lines of a wealthy person not really caring if they have to pay another $300 a year in insurance - thus, no punishment.