Why Dave Ramsey thinks ‘good credit’ is an oxymoron

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Is Dave Ramsey correct about this?

Key Point

• Dave Ramsey said good credit is an oxymoron.
• He believes that having good credit is bad because your credit score is a measure of your debt.
• Unfortunately, it may not be wise to follow Ramsey’s advice on this matter.

Most people aspire to have a good credit score. But financial expert Dave Ramsey thinks that’s a bad idea. In fact, Dave Ramsey describes good credit as “a contradiction.” He believes the term is self-contradictory, because there is no such thing as “good credit.”

So why is Ramsay at odds with so many other financial experts? And what underpins his belief that good credit is actually bad?

Ramsey doesn’t think credit is a good thing

Ramsey doesn’t think good credit is actually a good thing. “Borrowing money is the only way to get a good score. A lot,” he explained. “You are taking on a ton of debt and risk to get the ‘privilege’ to borrow even more. It’s a rogue system. ”

Ramsey suggests that you can and should opt out of this “rogue system” simply by refusing to borrow money.

You can’t have a good credit score without taking out a loan or getting into credit card debt. conduct As Ramsey says, you need to go into debt to show that you can use it responsibly and get a good score. He doesn’t want to borrow money, so he believes that’s fine.

Is Ramsey correct about this?

The problem is that Ramsey’s advice isn’t practical in the real world for most people, and good credit isn’t contradictory at all.

Good creditworthiness is defined as having a credit score between 670 and 739, scores between 740 and 799 are considered very good creditworthiness, and scores above 800 are considered excellent. This credit rating is earned by borrowing responsibly and repaying it on time.

Ramsey believes the borrowing required to get a good credit score is bad, but that’s not always the case. In fact, you don’t have to pay a single dollar of interest to get good credit. You can use your credit card to buy what you need to buy anyway, earn rewards, and pay off your card in full, both of which will benefit from your daily spending. When That’s how you get good credit.

And once you get the credit, all sorts of doors open. Ramsey thinks most things shouldn’t be rented, so he doesn’t really need to open those doors. He recommends buying a car and preferably a house with cash. And if you need a mortgage, he said, you can find a lender willing to lend you even if your credit is poor, as long as you do traditional underwriting and have a complete picture of your finances.

Problems with full cash payments

Paying cash for a house is not a good move because a mortgage is a low-interest debt and you can get a better return on investment (ROI) by taking out a mortgage and investing the cash elsewhere. There is none. Also, buying a functioning car often requires a car loan. If not, they may still be available at fairly low interest rates.

Plus, even if, ideally, Ramsay says, you don’t want to rent at all, you’ll need enough credit to rent an apartment or buy affordable insurance.

For all these reasons, good credit is not an oxymoron, and Ramsey’s belief can lead you astray. No Abandon your efforts to get a good credit score. Instead, make sure you’re doing what you can to get the type of score that helps your financial life.