What's wrong with Dave Ramsey?

[treemom]

I like Dave Ramsey's books and listening to his show on the radio. I don't agree with everything he says but I have also heard him be very compassionate toward callers who are discouraged or whatever about their finances, which I like. I find I learn things from listening or reading his stuff.

I do not like the blanket statements some people (not Ramsey but his followers) use though, like "a credit score means you love debt". Uhh, no. I get irritated when people go around parroting their "celebrities" and spouting off about how they believe in paying for everything with cash including their house, of course. I am not extreme on either side and wish people would show more love instead of jabs. It's OK for people to have different views. Really. About money and everything else.

/end rabbit trail.

This. I dislike debt, but that is a personL choice.

[Guest Anonymous]

I never understand this obsession with needing a good credit score and building credit. If you follow the Ramsey plan, well you don't need credit!

Are you being sarcastic, or serious? 8-)

I don't think anyone needs credit, but it could make life easier at times. It's somewhat like saying no one needs a mortgage.

[treemom]

Are you being sarcastic, or serious? 8-)

I don't think anyone needs credit, but it could make life easier at times. It's somewhat like saying no one needs a mortgage.

No, I am serious. If you buy only with cash or cash you have available the only time a credit report does anything for you is jobs and security clearance. I am not making a judgement on credit, I am saying those who are cash only aren't being hurt by lack of credit.

[treemom]

Btw, credit might make life easier, but it usually seems to make life worse for a lot of people.

[Guest Anonymous]

No, I am serious. If you buy only with cash or cash you have available the only time a credit report does anything for you is jobs and security clearance. I am not making a judgement on credit, I am saying those who are cash only aren't being hurt by lack of credit.

True. If you don't need a mortgage then of course it doesn't matter if you could get one. And there are ways to borrow money outside "the system", too. Most landlords also want a good credit score but I'm sure there are some who would accept a good rec. from a previous landlord.

I know when I saw my credit score last, points were deducted for not having "a car loan in good standing". I don't have a car loan at all. So I do get the silliness of it all in many ways.

[Guest Anonymous]

Btw, credit might make life easier, but it usually seems to make life worse for a lot of people.

This is true. I agree with you, I just put up my guard some times around the hyper folks. 8-)

[treemom]

True. If you don't need a mortgage then of course it doesn't matter if you could get one. And there are ways to borrow money outside "the system", too. Most landlords also want a good credit score but I'm sure there are some who would accept a good rec. from a previous landlord.

I know when I saw my credit score last, points were deducted for not having "a car loan in good standing". I don't have a car loan at all. So I do get the silliness of it all in many ways.

The point I am making is if you have committed to no new debt, it doesn't matter.

[treemom]

This is true. I agree with you, I just put up my guard some times around the hyper folks. 8-)

I think you are misunderstanding me. I am not advocating a position based on my feelings about debt, I am only saying the argument I have personally heard towards me and the way I act about debt is that my credit score will suffer. But since I will not take on new debt, it doesn't matter

[Rosa]

I'm with you, Treemom, but it did have some negative effects for me - like, when I was 25 and my partner was 21, neither of us could rent a car for a trip. I didn't have a credit card, and couldn't get one because of my lack of credit history, and my boyfriend wasn't old enough to rent a car with his credit card. (I think now you can rent a car with a debit card - at that time, with my debit card, I couldn't, even though I had enough cash to cover it.) It was an issue with utilities, too, when I was younger. And my partner has to have a credit card for his job, because he has to travel and they don't give out corporate cards - you can't make an airline reservation in cash.

It's not as bad an issue as having bad credit, but it can definitely be an issue if you're just starting out - leaving your parents, leaving a bad marriage, establishing yourself in a new career or whatever.

If you *have* a credit history - which, again, Dave Ramsey's audience is mostly people with debt, so they do - you can only make it better by getting out of debt. The history exists. My situation - no school loans, very few utility bills ever in my name, no cell plan, no car loan - is pretty rare and even though it's the condition Ramsey advocates, getting there after a more normal financial history is different than starting out there.

[Kaylee]

I do agree that going into debt just for the sake of building a credit score is bad (and I'm one of those people who probably should never get another credit card, so I haven't had one for years), but there are a few times in life when having not credit can hurt you.

My husband was one of those people Dave Ramsey would love. He was 29 when we bought our house and had never had a credit card or anything of the sort in his life, and had paid cash for all of his vehicles. I was in college and had one or two credit cards, but minimal income. He got the house totally in his name but, since he had no credit history, it made getting a loan much harder and we ended up with a higher interest rate and having to pay more money upfront than if he'd had a credit score.

Some people don't know this, but your credit score also affects car insurance rates, and having a good credit score can save money there.

[treemom]

I'm with you, Treemom, but it did have some negative effects for me - like, when I was 25 and my partner was 21, neither of us could rent a car for a trip. I didn't have a credit card, and couldn't get one because of my lack of credit history, and my boyfriend wasn't old enough to rent a car with his credit card. (I think now you can rent a car with a debit card - at that time, with my debit card, I couldn't, even though I had enough cash to cover it.) It was an issue with utilities, too, when I was younger. And my partner has to have a credit card for his job, because he has to travel and they don't give out corporate cards - you can't make an airline reservation in cash.

It's not as bad an issue as having bad credit, but it can definitely be an issue if you're just starting out - leaving your parents, leaving a bad marriage, establishing yourself in a new career or whatever.

If you *have* a credit history - which, again, Dave Ramsey's audience is mostly people with debt, so they do - you can only make it better by getting out of debt. The history exists. My situation - no school loans, very few utility bills ever in my name, no cell plan, no car loan - is pretty rare and even though it's the condition Ramsey advocates, getting there after a more normal financial history is different than starting out there.

That was me as well. No student loans, no debt, no loans. It hasn't ever impacted me negatively.

(and before someone implies it is because of some mystery wealth, I grew up below the poverty line and my husband worked at fedex hub and I had a 10/hr job when we married. ).

Again, I am not advocating anything, simply saying if you at this moment in tIme don't plan to have debt, then a credit score impacts job and security clearance. (our insurance was not based on a credit check). We do have a mortgage but it is aggressively being paid off and we will never have one again.

[treemom]

Ramsey doesn't ever indicate that you shouldn't have contracts on things, like cable, phones, etc. He just advocates you approaching it carefully. And I am pretty aure he supports having utilities in your name :)

[Rosa]

Yeah, but if you have no credit history, *getting* them in your name can be really hard. That was the problem I ran into - I'd only ever had a gas bill, and then only a couple times because I'd mostly lived places where the gas bill was included in the rent. Then I moved around a lot for a few years, including time overseas and time working as a nanny where housing was part of my pay. So when I got my first solo place, in my 20s, I had to pay high deposits to get a phone, electric hookup, etc - and it was a tight rental market and my lack of credit history made it even harder to find a place before I could even start getting utilities.

I had a roomate later who had a similar problem, but more money (I had no debts and no assets) and she actually had to get her bank to assure a landlord there was enough in her account to pay an entire year of rent, before the place would rent to her - she'd always lived with relatives or in the dorms, no debts or utilities.

I'm NOT advocating debt, but it really is true that being completely off the grid in credit terms can cause problems.

[urban teacher]

I do not follow Dave Ramsey because I did not find him helpful. I did find getrichslowly.org to be helpful in thinking about my debt, spending, etc. I tend to not like finance gurus.

[Guest Anonymous]

Yeah, but if you have no credit history, *getting* them in your name can be really hard. That was the problem I ran into - I'd only ever had a gas bill, and then only a couple times because I'd mostly lived places where the gas bill was included in the rent. Then I moved around a lot for a few years, including time overseas and time working as a nanny where housing was part of my pay. So when I got my first solo place, in my 20s, I had to pay high deposits to get a phone, electric hookup, etc - and it was a tight rental market and my lack of credit history made it even harder to find a place before I could even start getting utilities.

I had a roomate later who had a similar problem, but more money (I had no debts and no assets) and she actually had to get her bank to assure a landlord there was enough in her account to pay an entire year of rent, before the place would rent to her - she'd always lived with relatives or in the dorms, no debts or utilities.

I'm NOT advocating debt, but it really is true that being completely off the grid in credit terms can cause problems.

I think some things depends on where you live. Like landlords checking credit scores. Some do, some don't, and it depends on the market and what you're trying to rent.

My only personal experience with renting a vehicle in my name was last year and turns out they would not let me use my debit card to pay. Or cash. I had no credit card at the time. It was a huge pain. I had someone who had a credit card and would pay for it (I paid them back) but they were in another town and had to fax their credit card, signature, and authorization for the charges for the rental in my name. We were at the Hertz place for a couple hours getting it all figured out.

This doesn't mean that people have to have credit cards. Renting a car is not usually life-or-death, and if I hadn't had someone who would put it on their credit card then I just wouldn't have been able to rent the car. That's it. I think it's dumb that they wouldn't accept cash for the rental. I'm sure if more people refused to rent cars because of this, they would change their policy.

I suppose it comes down to a matter of living by principles. "This is wrong so I will be inconvenienced to make a statement."

[snickerz]

This is one area where I agree with the fundies. Debt = Bad. I kind of disagree with Dave Ramsey on the no credit cards ever thing - many people can't handle having one, that I understand, but others are fine with them. I have had one (and only one) credit card since I was 18 (I'm 45) and pay it off every single month. I think you just have to know yourself. If you can't handle it, go cash only. Just this one credit card with no balance gave us extremely high credit, we had no problems getting a mortgage. We pay extra on it every month to get it paid off ASAP. We paid our own way through college, pay cash for cars, etc.

For a free message board for the Ramsey plan try http://www.LivingLikeNoOneElse.com. It has people working on all of the various steps, and they'll give you encouragement to work your own plan to better financial health.

[aelar]

I was one of those people without a credit score. I got a credit card when I started college, maxed it out (mostly on non-frivolous stuff like groceries and utilities, but still) within a year, and spent the next few years paying it off completely, after which I decided credit wasn't for me, and went without a credit card for about 10 years, long enough to completely erase my credit history. After my first bobble with credit, I did all the right stuff, watched my purchases, built a very robust emergency fund, didn't take on debt, generally a very financially responsible person. But I still had to pay more to get utilities and such and had to have extra references when I moved to get approved for new apartments. So when I decided I wanted to buy a house, I did the "auto-pay credit card" plan to an excellent credit score.

(There is no way I was going to be able to buy a house cash, I live in the Bay Area, our fixer-upper duplex was half a million. I saved over a hundred thousand for the down payment, but a mortgage was inevitable, there's nothing you can buy except a motor home for under $100k here.)

The auto-pay credit card thing is so simple and easy, I don't understand why anyone responsible enough with money to not need a credit card isn't doing it. It's leaving cash on the table. I just put all of my expenses on the card, including utilities and anything else I can, and then have the payment auto-deducted from my account every month so I have zero chance of missing a payment. I have to keep a nice cushion in my checking account, but that's not a bad thing. Like someone else above, I've never paid a penny in interest ever since I got a credit card again. Never carried a balance even once. I get cash back on my purchases. It's easier to track my purchases and keep an eye on my budget because it's all itemized. I get the extra free protections that come with anything I buy on my credit card. And in about three years I went from no credit at all to over 800, and got an excellent interest rate when I bought my house.

I've made my big purchase, so my credit score shouldn't theoretically be as important now, but since I have a good score, and my credit card co is paying me to keep it that way, I don't see a reason to cancel the cards. Credit doesn't equal debt. Using credit and not paying it off immediately is debt. Credit is just credit, one external measure of responsibility, that rightly or wrongly is used for lots of things, more all the time.

[emmiedahl]

I bought his book a few years ago and it really had some good stuff in there. A lot of Americans are making bad, bad choices with their finances, and then they blame corporations or the socialist government (depending on their political views) when they end up in trouble. I live in subsidized housing so everyone in my complex is poor, yet satellite dishes are on every porch but mine, the parking lot is filled with luxury cars, and the Rent-a-Center truck is here almost every day. No one here can afford any of that.

The book is not a lot of help if you only have money for minimum payments and have already cut back as far as possible in your life. It helped when we were middle class, now that we are below the poverty level not so much.

[Lainey]

I live in subsidized housing so everyone in my complex is poor, yet satellite dishes are on every porch but mine, the parking lot is filled with luxury cars, and the Rent-a-Center truck is here almost every day. No one here can afford any of that.

That reminds me of a Repo Games (if they get 3 out of 5 trivia questions right, they get to keep their vehicles and the show pays them off) episode I saw yesterday. One couple had a BMW and a Corvette (BMW was his, Corvette was hers), and they were both being repossessed. Clearly, they couldn't afford those cars. Maybe they once had good jobs and lost them or something, but I have my doubts.

And speaking of, holy crap were some of those people freaking stupid! One girl answered "Bill Clinton" when asked which founding father conducted an experiment with a kite in a thunderstorm to prove that lightning was electricity (that's not quite how they worded it). :doh:

[O Latin]

See, I would love to do the whole get a credit card, use it, and then pay it off every month thing to establish a credit score, but I worry that having a credit card would be like playing with fire for me. I'm a bit of a shopaholic, not in a seriously addicted, life-ruining way, just in a "sure I can afford two pairs of jeans, I'll just eat really cheap food this week," way. I can barely control myself with my debit card. A credit card in my hands just has way too much potential for disaster. Plus, if it was just me on my own, I might do it, but my parents support me (while I go to school full time) and I don't want to end up in a position of having to ask for them money that I wouldn't have ever spent in the first place if I didn't have a credit card.

[Rosa]

You're a lot younger than me, so I assume you have a cell phone - if you have your own phone bill, that gives you a credit history. So pay in full on time!

I didnt' have a phone at all when I was 18, and then again when I lived in my own apartment at 21. In between we had a land line but it was never in my name. Then I spent a few years traveling around with no utilities at all. In the modern world, a person in that situation would have a cell phone all those years.

[O Latin]

My phone isn't in my name, though, it's on my parents' plan. The only bill I have in my name is my electric bill. Well, that and rent, but I don't know if that counts or not because my apartment is owned by the university and I pay the rent through the university website, the same way I pay tuition.

[aelar]

O Latin, not trusting yourself with a credit card is pretty understandable, and it's good to have that awareness. You could try requesting a credit card from your bank, and specifically ask for a very low limit, $300 or something that you know you could pay off even if you maxed it.

Then if your company lets you, switch your electric bill to be paid by your credit card, and set up your credit card to autopay in full, and then put the credit card away somewhere safe, don't carry it around. (The idea of keeping a credit card 'for emergencies' is one of the worst reasons to carry a credit card, I don't recommend it.)

You'll just be paying a bill you already pay, but at the same time, it's starting a history of on-time payments. As you go on, even if you never feel comfortable using your card for everyday purchases, if you continue to pull out the credit card only to pay something you were already going to pay anyway, like if you switch to paying your cell phone on your own, or maybe once a semester to pay tuition (if your college lets you put that on a credit card), you will be helping your credit score without adding risk or debt.

Just make sure the credit card doesn't have an annual fee, and try to get one with a reward system you'll use.

[treemom]

This is one area where I agree with the fundies. Debt = Bad. I kind of disagree with Dave Ramsey on the no credit cards ever thing - many people can't handle having one, that I understand, but others are fine with them. I have had one (and only one) credit card since I was 18 (I'm 45) and pay it off every single month. I think you just have to know yourself. If you can't handle it, go cash only. Just this one credit card with no balance gave us extremely high credit, we had no problems getting a mortgage. We pay extra on it every month to get it paid off ASAP. We paid our own way through college, pay cash for cars, etc.

For a free message board for the Ramsey plan try http://www.LivingLikeNoOneElse.com. It has people working on all of the various steps, and they'll give you encouragement to work your own plan to better financial health.

I do have a credit card now as well but pay it off as well every month. I have one with no foreign transaction fees because debit cards tend to have issues with that.

But we are very disciplined now with money

[treemom]

Yeah, but if you have no credit history, *getting* them in your name can be really hard. That was the problem I ran into - I'd only ever had a gas bill, and then only a couple times because I'd mostly lived places where the gas bill was included in the rent. Then I moved around a lot for a few years, including time overseas and time working as a nanny where housing was part of my pay. So when I got my first solo place, in my 20s, I had to pay high deposits to get a phone, electric hookup, etc - and it was a tight rental market and my lack of credit history made it even harder to find a place before I could even start getting utilities.

I had a roomate later who had a similar problem, but more money (I had no debts and no assets) and she actually had to get her bank to assure a landlord there was enough in her account to pay an entire year of rent, before the place would rent to her - she'd always lived with relatives or in the dorms, no debts or utilities.

I'm NOT advocating debt, but it really is true that being completely off the grid in credit terms can cause problems.

I simply had to put cash deposits down for utilities one time. Then we were good from then on. Of course once we were engaged we bought a house (here in memphis housing is inexpensive.). I am not saying it doesn't cause issues, it just didn't for me.