For all you Dave Ramsey fans...?

Question

Many of you advocate living debt free and paying cash for everything. So do I. I paid cash for my car and have no debt other than a mortgage (which I even pay a little extra on each month, though not at the expense of retirement and other savings).

But I qualified for that mortgage--at a great rate, right out of college, with no work history--largely because of my great credit score. Which I got by having credit cards. I use them only for big purchases and always pay them off, but I established a credit history and earned cash rewards in the meantime.

Like it or not, your credit score is the #1 thing any lender will consider. You are fooling yourselves if you thing it will be easy to get a mortgage with no credit--and you'll pay way higher closing costs/fees in addition to a higher rate if you manage to find a manual underwriter who will. Also, employers and even apartments now regularly check the credit of applicants.

Why try to fight the system?

Sorry I should clarify--many of you seem to really denounce using credit cards at all; you say that you shouldn't care about your FICO score and that credit scores don't matter. I'm asking, what's the harm in responsibly establishing a credit history? For that matter, sometimes debt is the best (or only) way to get a college education, or to take a low paying job that will really be good for your career, or own a home. Or to own a home.

Why are you guys all so gung-ho to tell everybody to cut up all credit cards and eschew all debt no matter what?

Answer 1

I agree. Dave Ramsey brings up some valid points to prevent from being in debt, and that's fine I agree with that. I'm always for saving an extra buck or two. But what I don't agree with is the fact that you should pay cash for everything and stay away from credit. Credit isn't the problem, it's people that try to live outside their means and completely forget that credit should be used a supplement, instead of a substitute. People tend to forget that credit should be used as a tool, whenever it's really needed instead of capricious usage. Case in point, I may use my credit card for unforseen medical transportation expenses when my "rainy day" fund might be a little short, instead of blowing my credit line just so that I can get a 62" sceen T.V. I could see it just fine when it was 27", why go into debt for something as stupid as that?

Now, I'm not trying to ruffle any feathers that's followed Dave's plan, it's a good plan and I've implemented certain concepts myself. But to think that you can live completely without credit, is a pipe dream. Take for example, I have this friend that's not in debt, practically paid for everything in cash for well over 22 years, including their college education. They had an opportunity for a job in which it was no question that they were qualified for, however, it required a credit check. I won't bore you with the details. Needless to say, that where it's good not to be working for credit, it helps when credit works for you.

Answer 2

Wow- a lot of you sound like Eeyore. This is the way it is so this what we have to do. If you want to live differently (aka, not living paycheck to paycheck and have retirement), you need to educate yourself. And I am not talking, get an MBA. Read, non-fiction. I am a huge Ramsey fan, but I have also ready Stanley (Millionare Next Door), Howard Dayton, Suze Orman, Mary Kay, Covey, Estee Lauder’s biography, etc.

When you use cash you use Manually Underwriting to get a mortgage. The same process most self employed and small business owner use to prove they have income. It means searching for a good bank that will do their homework and give you a good rate for not being slave to debt.

Why fight the system? Why did anyone fight for women's rights? Why did anyone fight for desegregation? Why did anyone fight for the end of slavery? Why did anyone fight to stop Hitler? Why did anyone fight the Taliban? Why did that loan person stand in front of the tank at Tiananmen Square in China? Why would the Enron employee blow the whistle on the Enron frauds? Just because something is popular at the time doesn't make it right, just or moral. I am not saying going into debt is immoral but living beyond your means is.

Using cash makes you disciplined and stops the "have to have it NOW!" attitude. Our society is very instant gratification. that is why the FICO score is convenient. It uses no brain cells to "use." But to look at credit correctly, you have to see what was reported. I used run 132 rental units/houses. I never based my decision solely on the FICO number, I used my brain and looked at what they had open, payments, etc. Having a low FICO doesn't mean you are a bad payer, in all cases. If you close your accounts and have them paid off your score goes lower, isn't that dumb? People that don't use credit get penalized. Well, I would rather take my time looking for a mortgage and the right lending institution than go back to the way my life was before getting financial peace. It is much easier to live my life and we have much less worry now then when we were using credit "responsibly." We have the cash, we know if we loose our job we will be ok.

Answer 3

Liz,

You are one of the few people who uses credit wisely and responsibly.

Most people who are "cash only" are that way because they were in debt over their heads. They learned from that lesson and choose (Dave Ramsey or not) not to go there again.

When I was in college, unlike you, I saw credit as free money. I paid some off, but most I ignored and it went away (that took a lot of time and effort on my part).

I now use my credit responsibly. My cards are either paid off in full each month or have 0% interest. I never get in over my head since I use my debit card for everything.

Answer 4

Thank god somebody finally said what I thought. I wondered how all these Dave Ramsey lovers got houses if they never once used credit.

There's NOTHING wrong with using credit responsibly. Period. Especially for education!!

I'm on your side. Be smart, dont go crazy. But if you want life to be easier -- employment checks, mortgages, etc-- you do need a credit file.

Answer 5

Paying cash for everything might work for the rare, percentage of people who simply are unable to use and build credit wisely. I would never pay cash for a car and Ramsey is completely wrong when it comes to leasing.

Answer 6

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