re: Can Someone Explain Dave Ramsey's 0 Credit Score

I'm 26, always pay cash for everything but decided to build credit so I could buy a house. Got a credit card like two years ago, just use it for small purchases and currently have a score of 777.

Closing on my first house in October and was able to put 20% down.

Each score model has some differenes, but there are 5 main factors.

Payment history
Credit Utilization
Credit History Length
Credit Mix
New Credit

Let's say you haven't had any open credit accounts for 20 years.

The first and third factors will be so out of date that the models won't do well with them, and the other three factors are all goin to be zero, which again, is going to mess with the models.

My understanding of the scoring models is that they start from a minimum score (it's not zero) and then add points based on the factors. So it's possible if you had no open credit for 20 years, but still have much older items on a report, you could have a minimal credit score.

If for some reason after such a time, you needed credit, you could find someone to manually underwrite a loan.

Dave Ramsey is full of shite when he says not to have a mortgage on your home.

It's true, if you can pay cash for your home, DO IT. However, what he doesn't tell you is that what most wealthy people do is they make sure they always have a HELOC on their home in order to have a mortgage show up on their home. This usually prevents attorneys from trying to go after their home in the event of a lawsuit.

My family consists of some extremely wealthy people (no shite, probably one of the wealthiest people in the state of Louisiana) NOT ME though LOL - and they've been doing this on advice from their attorney for decades. They have HELOC's on all of their properties even though they're all paid off just so they can add a small bit of extra protection. It's not fool-proof, of course, but it does add a small bit of additional protection.

And they go through hell every time they apply to renew the HELOC's because they have zero credit and have to submit shitloads of statements in order to be approved each time

The last time I tried to rent a car without a credit card, I had a bad time.

I imagine hotel rooms would be a no-go as well.

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Do what? Your debit card has a limit on it correct? Why would it be dangerous?

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cybersecurity. Disputes. Customer service.

Seems like a lot of work to make $212. And I think his point is, if the furniture is paid for in full, up front, and some major life catastrophe hits you still have your furniture. But if you finance and you somehow wouldn't be able to afford your monthly furniture payments anymore, now you've got the furniture creditor coming to repo his furniture.

I do think Dave is a bit too over the top and I like a modified version between Dave Ramsey and Suzie Orman myself. But for me personally, I was rolling along for a long time with lots of debt - personal loans, student loans, car notes, kids' braces on financing, etc, until I got into listening to Dave years ago. It made me tighten my purse strings (but not live on rice and beans) and get serious about paying off my debts. I did so with laser focus for a couple years and now I live debt free other than my mortgage. Student loans are gone, cars are paid in full, credit cards are paid off monthly. I will say, it is nice not having any debt or payments (other than a mortgage). At this point, financing furniture or something would never even cross my mind. I'd just write the check and be done with it. For me, I like the piece of mind and to be able to amass wealth toward my retirement.

It’s a weird audience

If you have good credit than you probably are smart about taking out loans that you can pay.

If you have shite credit you probably aren’t in a position to pay off your debt to begin with.

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Seems like a lot of work to make $212

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A lot of work? You spend 5 minutes longer than if you were writing a check. And this was just a risk-free example of what you can do with the cash, and using today's paltry savings rates. With a 5 year horizon, you could put it in an S&P index fund and make thousands. The average annual return for the S&P over the last 20 years is 5.9%. That would be a nearly $2000 return over 5 years. Just for spending an extra 5 minutes at the furniture store.

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But if you finance and you somehow wouldn't be able to afford your monthly furniture payments anymore, now you've got the furniture creditor coming to repo his furniture.

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I never suggested taking the furniture money and blowing it. I said to save it and make money with it. If something happens, you can just pay the monthly payment out of the savings/brokerage account, or pay it off entirely.

Back to your original point, if someone asked you to sit around for 10 minutes and they'd bring you $200, you wouldn't wait? You'd just leave?

Also, is it truly debt if you can pay it all off tomorrow without jeopardizing your retirement savings or emergency fund?

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I like the piece of mind and to be able to amass wealth toward my retirement.

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That's great, but you might not be maximizing your returns. Amassing wealth is all about compounding your money over time. Get as much money in as early as you can and watch it grow.

$6000 would be your maximum IRA contribution for the year. Put it in a Roth IRA instead of paying cash for the furniture and you can take it out without penalty if you need to tap into it.

There are so many things you can do with that money and the furniture store is just giving it to you for free.

Honeslty, I'd almost never consider paying for something in cash over a 0% interest deal. I'm extremely disciplined, though. Our home mortgage is the only debt we have that carries any interest.

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Dave Ramsey is for financial dumbasses. There is zero reason to put your credit cards in a blender unless you have zero self control

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Those are the people going to DR for help.....so....