Why Dave Ramsey Thinks “Good Credit” Is An Oxymoron

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Is Dave Ramsey right about this one?


Key points

  • Dave Ramsey said 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 issue may not be wise.

Most people aspire to have a good credit rating. But financial expert Dave Ramsey doesn’t think that’s a good idea. In fact, Dave Ramsey has described good credit as an “oxymoron,” meaning he thinks the term contradicts itself because “good credit” doesn’t exist.

So why does Ramsey disagree with most other financial experts, and what underlies his belief that good credit is actually bad?

Ramsey doesn’t believe good credit is a good thing

Ramsey doesn’t believe that good credit is actually a good thing for one key reason. “You only get a good score by borrowing money – a lot,” he explained. “You take on a ton of debt and risk, just to have the ‘privilege’ of taking on 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 incur credit card debt, you won’t get a good credit rating. It’s because you do need to have debt to show you can use it responsibly and earn a good score, just like Ramsey says. You could end up with no credit score at all if you refrain from borrowing, which he says is okay because you shouldn’t want to borrow money anyway.

Is Ramsey right about this?

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

Good credit is defined as having a credit score of around 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 achieve this credit rating by borrowing responsibly and paying off your debts on time.

Although Ramsey thinks the borrowing needed to get a good credit rating is bad, that’s not necessarily true. In fact, you don’t even have to pay $1 in interest to get good credit. You can use a credit card to buy things you’d need anyway, get rewards and pay off your cards in full and you’ll both benefit from day-to-day spending and earn good credit by doing so.

And once you’ve earned good credit, it can open all kinds of doors for you. Ramsey thinks you don’t really 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 who will give 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 with paying in full in cash

Paying cash for a house is not a good decision because a mortgage is low interest debt and you can get a better return on investment (ROI) by taking out a mortgage and investing your money elsewhere. And car loans are often necessary to buy a working vehicle, and even if they aren’t, they can sometimes come with a pretty low rate.

Plus, even if you don’t want to borrow at all, 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 of these reasons, good credit is not an oxymoron, and Ramsey’s belief that it is could mislead you. Although there are many things to listen to the financial expert about, you should not abandon your efforts to get a good credit rating. Instead, make sure you’re doing what you can to get the kind of score that can help you with your financial life.

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