{"id":7398,"date":"2024-11-06T08:39:09","date_gmt":"2024-11-06T08:39:09","guid":{"rendered":"https:\/\/finderica.com\/5-reasons-dave-ramsey-is-totally-wrong-about-credit-scores\/"},"modified":"2024-11-06T08:39:09","modified_gmt":"2024-11-06T08:39:09","slug":"5-reasons-dave-ramsey-is-totally-wrong-about-credit-scores","status":"publish","type":"post","link":"https:\/\/finderica.com\/?p=7398","title":{"rendered":"5 Reasons Dave Ramsey Is Totally Wrong About Credit Scores"},"content":{"rendered":"\n
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\"ScoreCard<\/p>\n

Dave Ramsey doesn\u2019t need a credit score. He says you don\u2019t need one either.<\/p>\n

The anti-debt crusader, who has an estimated net worth of at least $200 million, calls FICO scores the \u201cI love debt scores.\u201d He\u2019s proud of the fact that he doesn\u2019t have a credit score.<\/p>\n

Ramsey has inspired countless people to pay down debt \u2014 and we love that. But the truth is, he can afford to be credit invisible. If you\u2019re a regular person, not having a credit score makes life a lot more costly and complicated.\n<\/p>\n

5 Reasons Dave Ramsey Is Wrong About Credit Scores<\/h2>\n
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  1. You\u2019ll pay deposits for everything.<\/li>\n
  2. It will be difficult to get a mortgage.<\/li>\n
  3. Credit cards are usually the safest way to pay.<\/li>\n
  4. Travel is challenging without a credit card.<\/li>\n
  5. Credit can be a valuable tool in an emergency.<\/li>\n<\/ol>\n

    Here\u2019s what Ramsey gets right about credit scores: They aren\u2019t a reflection of your overall finances. Doubling your salary or your savings is great for your finances, but it won\u2019t affect your credit score, because a credit score measures only how you manage debt.<\/p>\n

    If you\u2019re like Ramsey and you don\u2019t have a credit score, that probably means you haven\u2019t used credit in the past 24 months. So the credit bureaus often won\u2019t have enough data about you to give you a credit score.<\/p>\n

    But you don\u2019t need to carry debt to have a credit score. In fact, one of the best ways to build excellent credit is to open a credit card and pay off the entire balance each month.<\/p>\n

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    7 Ways to Make Money if You Hate People<\/h3>\n

    Do you avoid people too? In the past, there was almost no way around working with people if you wanted to earn a living, but things have changed.<\/p>\n

    Our team has compiled a list of creative ways<\/a> you can fatten your bank account this month, without having to put up with people.<\/p>\n

    Enough small talk. Here are some ways<\/a> to earn extra cash, without all of the social stuff.<\/p>\n<\/div>\n<\/div>\n

    Here\u2019s why everyone who\u2019s not a multimillionaire should ignore Ramsey\u2019s credit score advice<\/a>.<\/p>\n

    1. You\u2019ll pay deposits for everything.<\/h3>\n

    Forget a three- to six- month emergency fund. If you\u2019re going to live without a credit card, you\u2019ll need to have a lot more cash saved because you\u2019ll have to pay deposits for virtually everything. Expect to pay first and last month\u2019s rent plus an additional security deposit, along with deposits for things like utilities, internet and cellphone service.<\/p>\n

    2. It will be difficult to get a mortgage.<\/h3>\n

    Ramsey says the people who need a credit score are the ones who plan to take on more debt. That\u2019s partially true. Having a high credit score helps you get the best financing rates for big purchases like a home, which few people can afford to pay cash for.<\/p>\n

    It\u2019s possible to get a mortgage with no credit score through a process called manual underwriting. Smaller banks and credit unions are most likely to offer this option. But be prepared to provide more documentation and for a longer approval process.<\/p>\n

    You can also expect to make a bigger down payment. This can be good if it stops you from buying too much house. But when you\u2019re buying a house you can afford, a large down payment requirement can keep you renting for longer. That costs you in the long run because your housing payments aren\u2019t building equity.<\/p>\n

    3. Credit cards are usually the safest way to pay.<\/h3>\n

    When someone hacks your credit card account, technically, that\u2019s your bank\u2019s money they\u2019re stealing when they make those fraudulent transactions. But with a debit card, they\u2019re stealing your money. In practice, your bank will probably refund your money if a hacker drains your account, but the process could take several days. That could leave you without cash or put you behind on bills.<\/p>\n

    Credit is the safest way to pay in situations where your data is vulnerable, like when you\u2019re shopping online or paying for gas at the pump. That doesn\u2019t mean you need to carry debt when you make a credit card purchase. You can pay off your balance daily if you want.<\/p>\n

    4. Travel is challenging without a credit card.<\/h3>\n

    You can probably check into a hotel or rent a car using your debit card. But they\u2019ll typically put a temporary hold on whatever credit or debit account you use. It\u2019s meant to ensure you have sufficient funds in case of damage. That\u2019s money you can\u2019t spend until the hold is lifted, which may not happen until several days after you\u2019ve checked out of the hotel or returned the car.<\/p>\n

    If you\u2019re paying with credit, that won\u2019t be a problem as long as your card isn\u2019t maxed out. But if you\u2019re paying with a debit card, a hold could lock you out of funds you need for basic expenses \u2014 or worse yet, cause you to overdraft.<\/p>\n

    5. Credit can be a valuable tool in an emergency.<\/h3>\n

    In a perfect world, you\u2019d have an emergency fund that can carry you through any crisis. But in the real world, an emergency fund can take several years to build. Using credit cards to get through an emergency isn\u2019t ideal. But in a crisis, it may be the least terrible option. Having access to a credit card can help you avoid dangerous alternatives, like payday loans.<\/p>\n

    No Credit Score? Here\u2019s How to Get One<\/h2>\n

    If you know that you\u2019ll be tempted to rack up debt because you have access to credit, it may be best to follow Ramsey\u2019s advice and live without a credit score. The inconvenience and additional deposits are worth it if you have a serious spending problem. But for most people, the advantages of credit far outweigh the downside.<\/p>\n

    If you don\u2019t have a credit score, either because you\u2019ve never used credit or you haven\u2019t had a credit card in a long time, the easiest way to get one is to open a secured credit card. You\u2019ll pay a refundable security deposit that will become your line of credit. After about a year of on-time payments, your odds of getting approved for a regular credit line are good.<\/p>\n

    Limit your purchases to no more than 10% of your credit limit, and pay off the bill in full each month \u2014 or even as soon as you make a purchase if you\u2019re worried about falling into debt.<\/p>\n

    With a little discipline, access to credit won\u2019t lead to debt. But it will make life easier and more affordable.<\/p>\n

    Robin Hartill is a certified financial planner and former senior writer at The SS.\u00a0<\/i><\/p>\n

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    The 8 Best Ways to Earn a Passive Income in 2024<\/h3>\n

    You\u2019ve probably heard the term passive income. It sounds appealing right?<\/p>\n

    According to the definition of passive, it would mean you\u2019re earning income without participating or having to do anything at all. Free money? Sign me up!<\/p>\n

    If you\u2019re interested in establishing a flow of passive income, here\u2019s a guide to understanding the term and getting started.<\/p>\n

    Check it out here!<\/a><\/p>\n<\/div>\n<\/div>\n

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