Sorry Dave Ramsey Credit Scores Still Matter

Your FICO score only says you've borrowed money and paid it back. It's not an indication of your net worth or your income or your savvy with money. All it says is you paid bills and you were stupid enough to go into debt so that later you could go further into debt by building up your FICO score, which is a false measure of financial health.

I agree with Dave Ramsey that consumers should not get caught living on debt, but when Dave Ramsey tells you don't worry about your credit score, we certainly can't support that kind of advice. Most consumers will need to borrow money at some point. Think about a mortgage. And we all know that a bank does not reward a low credit score. It can affect things like insurance discounts, getting a loan and even getting the best credit card [Music] rewards. [Music]

Welcome back to another edition of We're Talking Money. I'm Phil Clark, and today we're going to talk about your credit score and why it still matters.

Dave Ramsey, he insists it doesn't matter. So don't improve your FICO score. Set out to destroy it as quickly as possible by being 100% debt free with all accounts closed. As he puts it, your credit score is proof that you've borrowed a lot of money and you've paid it back so that you can borrow more money and pay that back. It's an "I love debt" score and an "I'm really good at borrowing and paying back a lot of debt over a long period of time" score.

We're going to talk about why that score still matters and why Dave Ramsey is wrong to tell you to ignore it. Now, don't get me wrong, I agree with Dave Ramsey that consumers should not get caught living on debt, but when Dave Ramsey tells you don't worry about your credit score, that's just not something that we get behind. We certainly can't support that kind of advice.

For better or worse, you're likely to need credit at some point during your life, probably more times than once, and for that reason you need a high credit score. It will affect how you get a loan and other things that we'll talk about.

So why does Dave Ramsey say that your credit score doesn't matter? He says if you don't have debt, who cares about a credit score? I haven't had a credit score in years, but it's really very minor compared to being freaking in debt to your eyeballs and paying all your income to a stupid bank and interest coming out your ears, all in the name of having a credit score. Stupid America.

Well, the fact is most consumers will need to borrow money at some point. Think about a mortgage. How would I get a house? How would I get a house? You'd have to save up and pay cash. How can you do that? No, I can pay cash for our house. Just tell people not to buy houses. You're just unrealistic. Dave Ramsey is unrealistic. Yeah, yeah, I am.

Suffice it to say, in today's world I believe that you need a high credit score now more than ever. A good credit score can make a huge difference in your financial life. It can affect things like getting a loan, insurance discounts and even getting the best credit card rewards.

So there is no question borrowers with the highest credit score are rewarded with the lowest interest rates when it comes to borrowing, and low interest rates can translate to big savings, and big savings can translate to faster wealth building. What a lender is doing is they're deciding if you're a good risk. If your credit score is low, chances are they don't want to loan money to you. When your credit score is high, it tells them you're a good risk. Chances are they'll reward you with the best options when it comes to your loan.

So what is a good credit score? Most lenders turn to something called a FICO score.

The lie is that the great provider in your life is the great god FICO, and if you worship at the altar of the great god FICO and continue to bring him offerings of interest by paying payments on your debt repeatedly, he will raise his eyes to you, bestoweth upon you, he will bestoweth upon you a greater score.

It's the one that probably has the greatest level of confidence of all of the lenders. The way that they list your credit score is in something called bands. So a high credit score would be roughly 740 to around 800. Now, a good credit score would be 670 to around 739, and a fair credit score would be 580 to 669. A poor credit score would be anything below 579.

Most lenders can consider a FICO score of 700 or greater to be a good score. You can rest assured, if you're going for a loan and your credit score is in the range of 700 or above, you're probably going to get the best rates available.

So when the guy goes, "Well, I'm doing okay, I've got an 850 credit score," what he really meant was, "I'm pretty stupid, I'm giving the bank a lot of money and I don't have any likely." So don't improve your FICO score. Set out to destroy it as quickly as possible.

Regardless of what Dave Ramsey says, unless of course you're independently wealthy, your credit score matters. Even if you don't need credit at the moment, it's so important to keep your score in good shape for the future.

Well, that's all for this episode of We're Talking Money, and I hope that it's inspired you to take a closer look at your credit score and how you can keep it as high as possible. Don't forget to subscribe to our channel. Give us a thumbs up if you like this episode. I'll see you next time on We're Talking Money.