Is Dave Ramsey right about this?
- Dave Ramsey said that good credit is an oxymoron.
- He thinks it’s bad to have good credit because your credit score is a measure of your debt.
- Unfortunately, following Ramsey’s advice on this matter may not be wise.
Most people aspire to have a good credit score. But financial expert Dave Ramsey doesn’t think that’s a smart idea. In fact, Dave Ramsey has described good credit as an “oxymoron,” meaning that he believes the term is self-contradictory because there is no such thing as “good credit.”
So why does Ramsey disagree with most other financial experts and what underpins his belief that good credit is actually a bad thing?
Ramsey doesn’t think good credit is a good thing
Ramsey doesn’t think good credit is really a good thing for one key reason. “You only get a good score by borrowing money, lots of it,” he explained. “You take on a lot of debt and risk, just to get the ‘privilege’ of going into even more debt. It’s a rigged system.”
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Ramsey suggests that you can – and should – opt out of this “rigged system” simply by refusing to borrow money.
If you never take out loans or take on credit card debt, you won’t get a good credit score. This is because you do you need to have debt to show you can use it responsibly and get a good score, exactly like ramsey says. You might end up with no credit score if you refrain from borrowing, which he thinks is fine because you shouldn’t be borrowing money anyway.
Is Ramsey right about this?
The problem is that Ramsey’s advice isn’t practical in the real world for most people, and good credit isn’t an oxymoron.
Good credit is defined as having a credit score of about 670 to 739, while a score of 740 to 799 is considered very good credit and a score above 800 is considered excellent. You can get this credit rating by borrowing responsibly and paying off your debt on time.
While Ramsey believes that borrowing to get a good credit score is a bad thing, that’s not necessarily true. In fact, you don’t have to pay a single dollar of interest to get good credit. You can use a credit card to buy things you’ll need to buy anyway, earn rewards, and pay off your cards in full, and you’ll both benefit from everyday spending. i get good credit by doing it.
And once you’ve earned good credit, it can open all kinds of doors for you. Ramsey believes there’s really no need to open those doors because you shouldn’t be borrowing for most things. He even advises paying cash for a car and, ideally, a house if you can. And he said if you need a mortgage, you can find a lender that will offer you one, even if you don’t have good credit, as long as they do traditional underwriting and look at the big picture of your finances.
The problem of paying in full with cash
Paying cash for a home isn’t a good move because a mortgage is low-interest debt and you can get a better return on investment (ROI) by taking out a mortgage and putting your money elsewhere. And auto loans are often necessary to buy a working vehicle, and even if they aren’t, they can sometimes have a pretty low rate too.
Plus, even if you don’t want to borrow, which Ramsey says is ideal, you’ll still need good credit to easily do things like rent an apartment or get affordable insurance.
For all these reasons, good credit is not an oxymoron, and Ramsey’s belief that it is could lead you astray. Although there are many things to listen to the financial expert about, you should no abandon your efforts to get a good credit score. Instead, make sure you do what you can to get the kind of score that can help you in your financial life.
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