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Debt-Free Living

3 Myths About Credit Scores

So, how important is your credit score?

You’ve probably heard that the almighty credit score is just a way of life. You can’t make it in life without a credit score.

That’s simply not true.

But why? If everyone says your credit score is almost as vital as oxygen, then how can it be untrue?

Let’s break it down a little bit. Here are three myths about the credit score:

1. Your credit score is an indication of financial success.

No way. Your credit score—maybe you’ve heard it called a FICO score—tells you one thing: how well you manage debt. It’s all about debt—how much and what kind of debt you have, how consistently you’ve used and paid on debt and that kind of thing. The best indicator of financial success is your bank account, not a high credit score. Related: Why I Hate Credit Cards

2. You need a credit score to rent an apartment.

This one’s not true either. If you have your first and last month’s rent plus a security deposit, a majority of apartment complexes will work with you. You might have to try two or three, but they are out there.

3. Keeping a credit score to secure low rates on car insurance is a smart move.

It’s true that no credit score or a bad credit score will drive up rates on your car insurance. But you’ll more than make up for that with all the money you’ll save by not paying interest to a bank for being in debt to build your score.

The sooner you begin paying cash, avoiding debt, and staying away from the credit score trap, the better off you’ll be in the long run.

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  • Julio Marchena

    Good article!!nnIs there a way you can do an article what you and your husband do for housing?nnDo you rent? Are you already owning? Do you rent from your dad’s real estate?nnI’m asking because I just finished the Legacy Journey. nnThanks, Rachel!! nnI’m a big fan.

  • Rachel Lynne Wallace

    I was curious about your personal experience as well. Do you own? Rent? How long did it take you to achieve your goal (if you’re there already)? Thanks for the wonderfully informative info!

  • Chris Johndon

    I will try that. I am on baby step 2

  • Tricia

    100% agree. I first moved out at 19yo into an apartment and I didn’t have much credit and I was self-employed but you’re right it doesn’t matter when you have cash for first and last and good job & banking history and references. I always found insurance depended more on age and other factors. Sadly, it’s just a right of passage when you’re young to pay higher rates. One way to cut that cost is to pay it up front and not make payments which include a monthly fee.

  • Karen Ferrara

    But what about buying a house or refinancing?

    • Mindy

      I’ve heard Rachel talk about this also. Of course, paying cash for the house is ideal. But I also know that if you push a banker, they can find an underwriter that will understand that when your credit score is 0, that means you are the coolest person on the face of the planet (OK, may that is a paraphrase). The point being having a credit score of 0 means you are debt free and pay for everything in cash, you manage money VERY well and there are underwriters who get this.

      • Maria

        If you don’t have a credit score and you try to purchase a home you will more than likely have to put down a large down payment and have a higher rate, if you can find someone to lend you money. Same goes with purchasing a vehicle. A person with no score will have almost a 18% rate. In my opinion credit scores do matter — how could a lender judge whether you “would” pay your debts in a timely manner.

        • Susan D.

          Not with FHA. FHA requires proof you’ll pay things on time. The lender can build an alternative credit report with proof that you’ve paid rent and utilities on time – you only need 3.

          • Bob

            Not so. Fha requires a minimum score of 580 and non-traditional credit won’t help you there.

          • Brian A.

            Wrong Bob…we have a credit score that keeps getting lower and lower (towards a zero) did not have a 580 and bought our house at 4%. this system works.

          • redheadjamie

            It is called manual underwriting look it up

          • anwrobins

            How does this actually work? My husband and I’s credit aren’t great At all, but we’d like to buy because we could actually be paying at lot less..and we’re never late on our rent. Can you provide more info l?

          • Susan D.

            Talk to a local bank and see what they can help you do. If you have any outstanding debts, like tax liens or judgments, you’ll have to pay those, but after they’re paid (or maybe at the same time), you might be able to qualify for one of the government loans. Your best bet is to start with the bank where your accounts are, and if that doesn’t work, go to a LOCAL bank; they’re more likely to work with you.

          • Cory H

            I’d highly encourage you to attend a Financial Peace University Class to get advice on owning vs renting…in addition to a lot of other great advice about finances in general. I guarantee you won’t be disappointed.

          • anwrobins

            Thanks! I’ve been considering it for years and haven’t but God has always bought me back to this teaching. I think it’s time to start!

          • Kevin Franzen

            You won’t be applying for a face loan with 20 down you won’t need that programn

        • Cory H

          I’m afraid you’re missing the point here. If you pay cash, there is no need to borrow money. It’s one of Dave’s fundamental concepts…if you want to buy something, save up and pay for it….it’s the 100% down, $0/month payment plan! It has become so ingrained in out culture that we NEED to borrow money to purchase things…this simply isn’t true.

          • Brian A.

            Well said Cory! This is where to many folks (especially today’s children) feel they are entitled to everything we have and should have it right now and the credit world approaches with the “you can…for this small payment” attitude and thought process!

          • sally

            But what if your transmission goes out and it’s 3000 dollars and you don’t have the cash? Sometimes you do need something to fall back on if you have an emergency!

          • Tay

            Build yourself an emergency fund and use $$ to pay for it. Dave recommends at least $1000 in a emergency fund for things of this nature. n

          • Kevin Franzen

            I would recommend 6 months of expenses plus money to cover things like car problems in separate account as I lost a job and found out it can be longer than expected to replace a good job.

          • Cory H

            You are exactly correct Sally! Life happens. That is why step #1 in Dave’s plan is to establish an emergency fund of $1000. His next step is to get out of debt using his “debt snowball” method…pay off everything except your house. Step #3 using the Ramsey method is to bolster that emergency fund…three to six months of your family’s expenses. Financial Peace University does an exceptional job of laying out this strategy. I’d highly recommend taking a class.

          • Bitter

            That is what your emergency fund is for.

          • Mark Kling

            yes, that’s why the buy a beater thing is idiotic…because old/used cars break down a lot. It’s a big gamble. Funny how he never stresses living close to work.

          • Hope Scarlett

            That’s why step one is to have an emergency fund set up. The steps work. Make all excuses to stay in debt. I will never have a car payment again!

        • Jason M

          What’s 18% of the zero percent I financed?

          • MeTooAmerica

            What is 8% of the 80% of my mortgage that I invested rather than gave to an owner? Not to mention the 28% of the 3.41% rate I got due to interest deduction against income. It is all relative

        • Kaitie’s Mum

          You’re somewhat making the point – if you have no debt – won’t you have more money to put down? You would need a lesser loan to value which will keep your interest rate low. With good income, good loan to value (good down – you’re not putting 3%), you will get competitive rates.

        • roeintense

          I think you’ve missed the point. You’re not financing cars if you have a credit rating of zero. Debt = bad. Also, on mortgage, 10-20% down on 15 year FR is the exception to the rule. Your down payment SHOULD be large.

        • redheadjamie

          If you know anything about Dave which clearly you do not…You know he does not advocate financing vehicles but saving up and purchasing one in cash.

        • Ken

          My rate is 4.625%. First mortgage, 0 FICO score. 20% cash down. Use a credit union not a bank.

          • Martha

            Ken do you realize that is NOT a great deal when if you had a good credit score there people getting loans now at 2%! And putting 20% down on a home that you will be in for the rest of your life may be sort of reasonable however if to sell that home in the next few years you have tied up a tremendous amount of liquid cash you could have had in accounts making more money for you. So I hope you never move!

        • Rebel

          The point is to pay cash. You don’t need a credit score of any kind if you pay CASH. No one needs a car that you have to make payments on!

        • Miguel Cuervo

          The idea is to use cash only. If you went the credit system and pay it in a timely manner that’s also ok. The thing in question is that the statement that we need a credit score to buy a house is not true. That idea has been sold to us by the banks. Anyway when you buy a house and get a loan to pay it, you are building a credit score while doing it. The bad thing about this is that people is not disciplined with credit cards and bank loans and end up choking in debt.

        • Adlausch

          He talks about cash options. Although typically people take out loans for cars.. The idea is to purchase one with cash in full.

      • bob

        Sure, underwriters might get this but get this comes with a risk as well. Enjoy your high rate on a portfolio loan.

        • Ken

          Nonsense. I did it and the rate was a smidge higher. No prepayment penalty either. With the extra cash I have because I have0 credit, (no debts), I make double payments the rate makes no difference.

      • Debi Buchanan

        I am an underwriter, so this information is 1st hand. You may be able to qualify for some mortgage products with no credit, but your interest rate will likely be higher; that is based on your FICO score. At least in my business, you CANNOT qualify for the best mortgage rates with no score. If you have a low score, the rate is even higher. nnIf you pay off a single credit card monthly as I do, have an 800+ credit score, additional interest you’ll pay on the largest debt you’ll ever make doesn’t outweigh the benefits of not maintaining your credit score to me. The difference could be considerable over the life of a mortgage loan.nnNot everyone makes the kind of money that Rachel & Dave make and can afford to pay cash for a home & not have to consider the consequences when it comes to mortgage lending.

        • Kaitie’s Mum

          But, Debi, you don’t need to make loads of money to live debt free and save money to purchase a house with enough down to get a competitive rate (how many 50% down packages have you written?). Look at the portfolio of your typical buyer – few credit cards, two car payments, maybe some student loan debt – that easily adds up to $800 – $1000/month. If a family is saving that money and not giving it to a lender, it won’t take long to have a huge down payment. nnAnd let’s just suppose you were correct – they have a zero credit score (ghost) and have a (let’s be generous) 2% rate increase, you talk about the cost over the life of the I.. .

          • Debi Buchanan

            At least at my financial institution, we require a 2 year credit history. Outside of that, do you really want to pay financing costs again in a year or two because you didn’t have a credit score? They can be considerable, depending on your loan amount, program, available points, etc.nnI really applaud people who live debt-free. Aside from my mortgage, I try to do so as well. My only reservation about not having a credit score is for people who may be in the market to purchase a home. I’m just saying that there is a downside that people should be aware of in order to make an educated decision.

          • Iryssa

            If the deals on interest rates are actually as good as you claim HAVING a good credit score, won’t the cost of refinancing be ultimately more than made up for when these financially responsible people have pretty much a perfect score and more than reasonable debt-to-income ratio in a few years? Also, wouldn’t someone who is skilled at their job show their clients how to minimize those costs and/or the impact of them by PLANNING on a refinance in a couple years?

          • Iryssa

            Also, a wonderful thing happens when you don’t have any other payments: The ball rolls SO much faster on everything. That means these people without credit scores because they manage their cash-flow so well will likely have their homes paid off FAR sooner than someone who doesn’t manage money so well and has a great interest rate.

        • Ken

          The rate doesn’t matter that much anyway. I have a 0 credit score. All of my friends and relatives scoffed at me. They said it won’t be possible. My mortgage was done at a credit union. They gave me a manual underwrite. The rate was a bit higher but I have so much more money because I have 0 other debts that I make double payments. I did the DAVE 15 year fixed with 20% cash down and payments less than 1/4 of take-home pay. My house will be paid off in less than 4 months. I bought it 5 1/2 years ago. It’s the ONLY way to do it.! Who’s laughing now?

        • Teresa Rogers Strickland

          I love Dave and he changed our lives. However, I agree wholeheartedly with what you are saying. There has to be a balance.

        • Ken

          0 Fico Score, 20% cash down, 15 year fixed, 4.625%, 10 year job, $45k per year income, $100K house. I have not borrowed money since 1997 before this mortgage got APPROVED in 2010. CREDIT UNION!

        • Maurice evans

          Me and my wife lived off one income and used the other income to build a 2071sqft home with cash in north carolina. We have no mortgage and never ask for one.

          • Debi Buchanan

            Congrats! That’s a great accomplishment!

          • Maurice evans

            Thanks! It took us five years. We bought land in 2010 and took our time. We saved and built, saved and built. We went through a bankruptcy in 2007 and knew banks would never want to lend us money. So I went Back to school and learned the basics of building and meet alot of good tradesmen. I paid them to help us build. We will move in next month. We borrowed money from her retirement account and just lived paycheck to paycheck.

      • bstueve

        My parents wanted to help me buy a car by co-signing for me when I was in high school. They had the cash in the bank to back up the loan and they paid cash for everything. The bank refused to give me a loan because none of us had any credit. They told us no credit was worse than bad credit. They actually told my parents it would’ve been better to be late on some bills so they could get a credit score. Of course my parents didn’t do that, but I thought that was ridiculous!

        • Tay

          Yea pretty ridiculous. They just wanted your business

      • Jessica Lee Forgy

        That is a full out lie. I could not find anyone to finance our mortgage and consider my income with my credit score of 0. My husband has a credit score thus the brokerage will only let us qualify and get a rate on his income and independent assets, ignoring the other 40% of our household income. No one would consider my income or assets even though we have a full 20% down, 2 cars paid in cash, significant saving and investments, years of paid bills, none of it counts.

        • Brian A.

          Who is lying here Jessica? The “creditors” that want you to take a high interest loan or those of us that have used Dave’s program?

          • Bob copy

            Ok, Brian post the lender’s info who you used so others can get financed.n

        • Ken

          CREDIT UNION.

        • Me too

          Churchhill mortgage will.

      • martha brown

        This is absolutely not correct information. The items posted here as supposedly easy to get around without a credit score is in fact a nightmare to try to get loans, apartments etc without a credit score. And you actually do not have to be in debt to a bank just to utilize your credit. What you don’t tell people is the fact that Yes while it’s possible to find an apartment group to rent to you without a credit score or no accounts reporting against you but it wont happen with just first and last months rent. In fact most places can and do require anywhere from 3-6 9months rent in advancewith double security deposit. And good luck getting a home loan without a credit score. This is absolutely not giving full information to your readers. Which in turn can and will harm them. I can’t believe what I am reading.

    • Bethany Jones

      What you will need is 20% down. This will keep you from paying a mortgage insurance and prove you aren’t at risk of default. You will also need records of consistantly paying utility bills on time and in full. It may take some time to find underwriters that will work with you.

      • Meatworld

        Actually alternative credit “scores” exist now which would help find underwriters like eCredable.com. just a FYI

    • Susan D.

      FHA doesn’t require a credit score. (13 years in real estate) They require proof that you pay your debts on time, which is easy to establish with utility bills, rent payments, and car insurance. Having no credit is better than bad credit.

      • RR

        Fha does require credit score, not sure what rock you have been living under! (20 years in real estate)

        • Jason M

          RR, 20 years experience should make you sharp enough to provide a citation right? Something like this? http://www.fha.com/fha_requirements_creditnnLet me quote it for you so you don’t have to look it up:nnTwo lines of credit are necessary to apply for an FHA loan. However, in nthe event a borrower does not have sufficient credit on their credit nreport the FHA will allow substitute forms.

          • Lindsey Florida

            Its not that FHA requires credit, but your interest rate will be way higher with no credit and even higher with bad. I did FHA 4 months ago with a great broker which I was always a believer in going thru credit unions for all loans but totally wrong when it comes to home loans. Brokers are the way to go to get better deals. I have excellent credit 750 & cosigner in the 800’s. On $200,000 my two choices were FHA 5% down and 3.75% interest or conventional 20% down and 4.65% interest 11/14. So I didnt want to get rid of my $40,000 savings and did FHA. There are positive and negatives to each. The biggest positive less money down, less interest paid, lower total money paid for the house. The bad is the $3500 gave to mortgage insurance and $200 month towards it but my payment is $1,279 and I pay $600 to principal every month. This is what worked best in my eyes. The conventional would of took majority of savings and been higher payment, higher amount paid in interest and took me longer to pay off.

          • Drew

            Hey Lindsey hate to break this to you, but the reason the broker told you to go FHA is because he made more money off the loan. Unless your co-signer was a non-occupying co-client I could have gotten you 5% down conventional with no PMI and without having to pay the $3500 up front mortgage insurance. Most likely with a rate in the high 3’s or low 4’s as well. Brokers aren’t always the “best deal” he sold you the loan that put the most money in his pocket unfortunately. nnAlso, did he forget to mention the PMI is on the loan forever? I’m not quite sure paying $72,000 in PMI over 30 years is better than conventional.

          • Lindsey Florida

            My cosigner was non occupying Drew. Plus I know its the life of the loan, but I can refi. It was my choice what route to go. Im paying extra to principal so wont pay for 30 yrs probaly pay in about 10 yrs. My credit was 2.706% that rocked. My broker was great 30 years in the indusrtry.

          • Drew

            Great. Refinancing sooner rather than later will help. Your effective rate on FHA is over 4.88% with the MI. You need to pay $1000 extra to principal roughly to pay in 10 years. Hope this helps.

        • Jason M

          And since I quoted from a .com and not the actual government site check this one out:nn”Neither the lack of credit history nor the borrower’s decision not to nuse credit may be used as a basis for rejecting the loan application. Wen also recognize that some prospective borrowers may not have an nestablished credit history. nnnnFor those borrowers, and for those who do not use traditional ncredit, the lender must develop a credit history from utility payment nrecords, rental payments, automobile insurance payments, or other means nof direct access from the credit provider. The lender must document nthat the providers of non-traditional credit do, in fact, exist and nverify the credit information. Documents confirming the existence of a nnon-traditional credit provider may include a public record from the nstate, county, or city records, or other means providing a similar leveln of objective confirmation. n”nnhttp://portalapps.hud.gov/FHAFAQ/controllerServlet?method=showPopup&faqId=1-6KT-2047

          • Susan D.

            I processed many an FHA loan wherein the borrowers had no traditional credit. I still say no credit is better than bad credit.

        • trishab95

          Fha does not require a score. You can use alternative credit (car ins, utilities, cell phone, rent). I’m a loan officer and just got 3 couples approved to purchase a house with 0 as their credit score. 3.5% is all that is required for down payment.

    • Jared

      Churchill mortgage can get you a mortgage without a Fico score

    • Me too

      Call the nice people at Churchhill Mortgage. They do this type of loan everyday.

    • Mama

      Haven’t had credit cards in 15 years. Bought a house in 2007 @ 6% interest, refi @ 4.25%. Just paid it off in August.

    • Christopher Brandy

      Cash is best

  • a clark

    Sorry Rachel your credit score does affect your insurance rates. Especially if your credit score is high. Our insurance agent cancelled all our policies and gave us a preferred rate which save us several hundreds of dollars on our house and auto insurance. I have my insurance license and the agent I worked for check every new prospective clients credit score.

    • Meatworld

      I agree, her article should just be two myths. But she does point it that the benefits of living debt free should vastly offset/be worth the increased car insurance, plus you can offset the increase in by getting a cheaper car to insure instead.

    • Money talk

      Well that’s illegal lol. Insurance score and credit scores are different. Very different.

    • justmeeveryone

      This is just not right. I have had credit problems in the past but am currently debt free. I pay all of my bills on time and do not use credit cards. I own my home outright and pay my insurance on time. I own the house that I was raised in and have trouble getting affordable insurance. The company that my parents insured the house with for over 50 years refused to insure it for me .I have actually improved the safety of the house with new wiring and new gas fixtures and still have to pay way too much for insurance. Credit scores should have nothing to do with insurance. As long as my house is safe and I pay my insurance bill I should be able to get affordable insurance.

      • Cory H

        If everything you own in paid for, why not just self insure? Granted, state laws likely will require you carry a liability policy on your automobiles, but that should be considerably less expensive than a full coverage policy. Secondly, if you own your home and you have an emergency fund, couldn’t you accept more risk by way of higher deductible? thereby reducing your premium. It seems to me that insurance companies and banks have figured out how to make us all feel as though we NEED them to get by in life…which simply isn’t the case.

        • justmeeveryone

          Cory H can you explain self insurance? It can’t be as easy as it sounds.

    • Mark O.

      About ten years ago when my credit score wasn’t so good, I received a letter from my insurance company stating “my rate would have been lower, but I had a poor credit score”, which apparently makes you a higher risk.

  • Cc

    Ok, I have issues with this. I’m not a financial “expert” like the author, but really?nnMyth 1: Quite the contrary! Yes, your credit does to a great degree indicate your financial success. If you don’t pay your bills, hopefully it means you don’t have any money and you’re not just keeping a “large bank account. “nnMyth 2: What, Go ahead and try that. Good luck with your neighbors nnMyth 3: So, people keep their credit scores up so they get better insurance? What?nnI respectfully disagree with the author. You need to have credit. And good credit at that. And use it wisely.

    • Meatworld

      If you think about it, your credit score is about borrowing money. It’s a lie that the credit card companies fed to America. You don’t need debt to be financially successful. Debt just means you pay interest for being financed. Most of the richest people don’t have personal debt and only borrow for their businesses. nnWhy would renting with alternative credit like having first and last months’ rent plus the security deposit because by living debt free you have more money saved up affect your relationships with your neighbors? nnThe idea about maintaining a credit score is you have to maintain debt to do so. I would trade higher car insurance in exchange for having more money, less stress, and there are more factors to car insurance than just your credit score like driving history, type of car and coverage. You could easily offset the cost of increased car insurance with earnings from investments and perhaps by driving a cheaper to insure car.

      • Stormybarb

        Meatworld, I don’t disagree with a word you said. We will be debt free in a year and I will never finance anything but my home ever again. However, I thing the original poster was saying that the only neighbors you will have will be the kind of neighbors you don’t want to have.

        • Meatworld

          That’s awfully pessimistic.

    • KO couple

      Cc, it does not sound like you are familiar with Daves fundamentals. We just became debt free, refinanced our house to five years and save over $100k in interest charges. By the way, after getting shot down by big banks because they were not going to profit from my refi, we found one of those lenders that treat you like a human, not a number, and came up big. It is all thanks to following and taking advice from succesful people like Dave.

  • behindthecross@hotmail.com

    For each person that disagrees with Rachel, we should simply compare our lifestyle and our accounts to Rachel’s. I do believe the evidence outweighs the opinion.

    • Jason M

      I’m game. What do you want to compare? Balances? Mortgage interest? Income?nnThe truth is your anecdote and my anecdote do not in any material way disprove the twenty-five YEARS worth of experience Dave and his crew have. nnI can’t quite wrap my head around you people that think your singular personal experience trumps Dave’s as an industry leader and someone who has helped *millions* of families get out of debt and build wealth.

      • Jason M

        Bah. I apparently can’t read today. You’re not one that disagrees… I don’t think a comparison with Rachel does many people any favors…

      • behindthecross@hotmail.com

        Jason, I am in agreement with you. I was simply speaking to all the people that DO disagree with the 3 myths. Blessings.

      • behindthecross@hotmail.com

        And Jason, before commenting with pointed remarks, remember, you have no idea where these people are in life. That one pointed comment could be just what it takes to push them over the edge. Or that one comment made clearly but in love…could be the comment that lifts them up and gives them the courage to take it that next step in life.

    • Debi Buchanan

      Not everyone makes the kind of money Rachel makes. She is able to make different financial decisions as a result of her resources. I agree with most of Rachel & Dave’s insight, but as a mortgage underwriter, I can’t agree with this. Most people will need at least a mortgage at some point in life, the price you’ll pay for not maintaining your FICO score could be considerable over the life of a mortgage loan.

      • behindthecross@hotmail.com

        Or…we can rent. Respectfully, most people will take advantage of a mortgage, but that does not constitute a need.

  • bob

    If you pay cash for everything and don’t utilize credit you will have no credit score. That means no home buying and renting for life. Enjoy paying off your landlords mortgage.

    • Susan D.

      No, it doesn’t. FHA doesn’t require a credit score. You can build an alternative credit report with proof that you’ve paid your rent and utilities on time.

      • Kevin Carrero

        susan on my credit reports no utilite comp or landlord ever posted on my credit report that i always paid on time.and when i rent my homes i never posted that my renters paid on time.

        • Susan D.

          The loan processor or credit score companies have to call and verify the information you give them. They can build a non-traditional credit report with 3 or 4 phone calls and your bank statements. I did it many times. Landlords and utilities don’t report to the 3 credit score companies until they’ve had to sue, which they will then report as bad credit.

          • Meatworld

            If not, you as the potential borrower can use a company like ecredible.com where they send requests to the landlord where you rent, utility companies and etc to confirm your payment history independently like accounting auditors do every day, the process is called attestation. And bring that report with you. (I am 0% related to the website, just think they are refreshingly helping people.)

    • AC

      You should call, Dave and ask him about that, he has explained that one as well. Steady work history and good down payment, many mortgage companies will except that instead of a FICO, score. But again, Dave can explain in much greater detail, then I, can.

  • Angie Patterson

    Dave I usually agree with you but in this world thy they even ck it for jobs. I know it just shows how you manage debt but I still think it’s important to have a high credit score. Thank youn

    • looking for a job

      I think my credit score is affecting my job search.

      • Justin Garcia

        When I was job searching back in 2012, the only time my credit score was run was after I got an offer. Because it was a financial institution they did both a credit check and a background check. My credit score at the time (and still is zero). It was not a problem in my case. They mentioned it was only bad credit that was a deterrent. But I can’t imagine a company running your credit prior to offering you the position.

  • Richard

    Credit scores do matter and I have taken Dave’s class before.Good info but not necessary “gospel” but worth it to get a better understanding of money.Saving cash for a home in California is not practical unless u have the ability to save 200,00-400,000 because that’s real estate in California.Unless u can find a ‘cheap”fixer for 150,00 and you don’t want to live in those kind of neighborhoods believe me.

    • Beth

      My California fixer upper was appraised at $500K and needed about another $75K to make it livable. California is a big state with a wide range of home values, but Orange County is going to require that kind of money for anything better than a starter home.

  • Insurance agent

    As an insurance agent I will say that a 0 credit score will get you close to the best rate a company will offer. If you have bad credit it will be very high though. This is universal through most insurance companies. Dave’s way really does work. People come into my office afraid of the rates because they have 0 credit. Great rates every time.

  • Kevin Carrero

    my credit score was 800 plus 6 years ago, i was in a car accident . sold my 6 homes ,boats,jet skis for what ever i could. sold my ice cream stores . i couldnt walk for two years. nothing was foreclosed or repoed. after i started to get around, i needed a handicaped van to get to dr.s, stores ect. i found out that my credit score over two years fell by 178 pts. i couldnt get a auto loan. while wait to settle my claim against the other driver, i had to spend my savings. now 6 years later my score is low and i cant get a loan. so i do believe credit score dose matter.nn .

  • Beth

    I paid cash for my home. I also paid cash for two duplexes that produce my income. My credit score is poor because my credit cards are over 70% utilized, and my debt to income ratio is VERY high, but I’ve never had a late payment. I am NOT able to take a loan out to consolidate my debt because I don’t have a regular job and have less than two years tax returns reflecting my rental income. Patience will pay off, in my case, but in the meantime I have to keep using high interest (25-30%) credit cards to finance repairs and remodels. I would have been better off to have mortgages (7% interest) and pay cash for the rest. n

    • Lindsey Florida

      Live and learn you will get there. Very true to finance place and pay cash for repairs from the rental income. You should have a budget on your duplexes covering all income and expenses with a line item for maintenance savings and card payments. This avoids future charges on the card. Your ending balance of any budget should always be zero. So theres a savings or allocation for all income.

    • Meatworld

      If you paid cash for the real estate and thus have 100% equity, I find it hard to believe you couldn’t get a home equity line of credit which would certainly be better than a regular credit card. The bigger problem is that seems to me you don’t have positive cash flow or have very low cash flow, and not a regular job. If you had sufficient cash flow, you wouldn’t need to borrow at all.

    • Charliegirl

      Beth, have you considered seeking a non-profit agency ‘Consumer Credit Counseling Agency’ to get the credit cards under control? A debt management program may get the interest rates reduced so you can get them paid-off quicker. You then will not need to extend credit to make those repairs. I am a certified credit counselor. Suggestion…do not remodel until the credit cards are paid.

  • Kevin Carrero

    beth i agree and feel sorry for you i hope it works out for you

  • JZ

    Wow. So who do I believe/trust for good information? ( I’m gonna go with my gut)n

  • Steve Perna

    Will my credit score hurt my kids college possible student loans or grants?

    • Iryssa

      Shouldn’t. What’s more likely to affect it is your actual income: As a student, if your parents make a lot of money, they will expect your parents to help you instead of Student Loans.

  • Traci

    let’s talk about lender overlays. It doesn’t really matter what FHA does or doesn’t require if there are only a few lenders willing to lend with that criteria. YES you can find investors that will lend with no credit score and YES you can find lenders that will build an alternative credit report with non-traditional trade lines, but you just eliminated all of the available traditional lenders and drove up the rate and fees. It is actually very very easy to trigger at least one credit score with FICO, and let’s please recognize the difference between credit and debt. You DO NOT have to carry a balance on revolving credit to trigger or maintain a strong credit score. I totally agree with paying cash and not buying anything you cannot afford, however, a credit card is a tool that can be manipulated to trigger a great credit score. you can still put 20 percent down and avoid mortgage insurance, while also enjoying the benefits of the best pricing available in the market place. and you can certainly still use the Dave Ramsey education to race your amortization table, pay your mortgage off early, retire young and completely debt free. My 2 cents 🙂

  • P Luna

    What about how Lexus a Nexus uses your credit report (a charge put on my credit card and it wasn’t mine….fought it….had it removed…..showed up on my credit report) and added $300.00 to my house insurance for the year. Is this a scam or what?!?

  • deb

    I do pay cash for things, have no credit cards, which I like BUT my credit score is very bad. The only way I can raise it good as far as I know is to get a prepaid secured credit card that will report monthly, use it to pay some of my monthly bills and pay it off monthly so that every month it shows paid in full. I need my credit score higher so I can get a house. I have hardly anything that I pay monthly that goes on my credit so I feel helpless. ?

    • Meatworld

      Try ecredible.com for alternative credit. I don’t work for them or get any kickback I just think they are refreshing helping people.

  • Ken

    The rate doesn’t matter that much anyway. I have a 0 credit score. All of my friends and relatives scoffed at me. They said it won’t be possible. My mortgage was done at a credit union. They gave me a manual underwrite. The rate was a bit higher but I have so much more money because I have 0 other debts that I make double payments. I did the DAVE 15 year fixed with 20% cash down and payments less than 1/4 of take-home pay. My house will be paid off in less than 4 months. I bought it 5 1/2 years ago. It’s the ONLY way to do it.! Who’s laughing now? BTW…I used a Dave ELP for an agent. She was wonderful. I used Dave’s financial method to save for the down payment while helping to pay for my daughters college in FULL. She is a debt free college graduate in her 20’s. The LEGACY has begun!

    • Tay

      that is awesome ud83dudc4fud83dudc4f congrats to u. I’m following you and Daves method. I like it.

  • Christy

    Potential employers look at your credit report to determine hiring. It’s important. When you spread the message it’s not important, you give people who are not yet informed the idea it’s not important and that can have catastrophic results depending on their level of knowledge. It would be wise to add additional information about the role paying bills on time, etc affects your credit report and and THEN share this.

    • Meatworld

      Yes if you have a LOW credit score, you are a financial risk. If you have NO credit score, the company should not have issues hiring you if they are smart because they should realize it means you are responsible, don’t live beyond your means, and therefore not likely to steal or be enticed by bribes and etc. (with the basic assumption you’re not 18 and still living with your parents)

  • G Smith

    Amen, Rachel!!!

  • Pam

    I have heard of people getting turned down from jobs because of low credit scores.

    • Meatworld

      Yes if you have a LOW credit score, you are a financial risk. If you have NO credit score, the company should not have issues hiring you if they are smart because they should realize it means you are responsible, don’t live beyond your means, and therefore not likely to steal or be enticed by bribes and etc.

  • Mark Kling

    I have a 816 Transunion score, with about 100 usd of debt. I’ve flown around the world for just taxes five times in the last 10 years. BTW, some states don’t allow first, last, +deposit……but yeah, in some areas they will rent to anyone. Bank accounts are important, too.

  • Mark Kling

    Employers run credit reports, also.

    • justmeeveryone

      Yes, which kind of sucks because if you had a good job your credit score could improve.

  • Jason

    Remember, in all of this, when getting out of debt your being as intense as humanly possible. You may be working two or three jobs. Selling a lot of what you own. Selling a vehicle you already have a loan on. Empty your savings into paying off debt (minus your $1000 EMF). The end goal is to put yourself in such a financial situation that loans are not an issue and making investing your money work for you. No one is going to force you into taking steps like this. Even Dave R will tell you that if having a FICO score is important to you then go right ahead and keep on being in debt. But honestly for me, I have learned the hard way that debt equals only one thing and that is financial risk. And financial risk is not not a viable option any longer. No job is safe and your health could take a turn for the worse very quickly. Then what are you left with? Debt that you can’t pay.

  • AaronB

    Here’s a myth: having a balance on a credit line is necessary to build credit. You can open a line of credit, even a small one ($200), never touch it, and be building credit. It won’t cost you a cent.

  • Mary

    I’m very confused about debt to income ratio… I’ve heard not closing out your credit cards makes this ratio look better , even if there are zero balances. This doesn’t make sense to me???

  • Martha

    It seems some are confusing credit utilization of current accounts to show peformance which is how your credit score is created vs people who have True out of control spending problems. If true uncontrollable debt is a person’s issue then yes for a time They may need to do with out buying on credit etc. To control their own problem. But please don’t middle that with the concept of using credit is bad and no one should ever use it. That is throwing the baby out with the bath water. And what that type of behavior tells most lenders is that you are so afraid that you can not control or manage your finances to the point that you are scared to even use credit at all. And that is a Fact! And you end up tying up more of your cash in much larger down payments, deposits etc. Any company you wish to do business with will absolutely protect themselves financially against being left holding the bag for someone who could shaft them on their bill. And most people don’t have the extreme amount of liquid cash to live that way. You end up thing up much more money without utilizing your credit. It makes no sense financially.

  • Jackie

    Oregon rates their car insurance on your credit. Bad credit high car insurance ratesnnexample my husband drives a 1992 Honda civic he has bad credit he paid 1200 for the car his insurance would be 2400 a yearnnCauses people to drive with no car insurance

  • Salome Njeri Njoki

    TESTIMONY ON HOW I GOT MY LOAN FROM A GENUINE LOAN COMPANY{ forester.financing.services808@gmail.com } nnHello everyone, My name is Mrs,Salome Njeri Njoki, am writing this testimony because am really grateful for what Mr. Rich Skipper, did for me and my family, and i told my self that any lender that rescue my family from our poor situation, i will tell the name to the whole wild world and i am so happy to say that my family is back for good because i was in need a loan of $ 250,000 USD to start my life all over and pay my bills, as i am a single mum with 4 kids, and the whole world seemed like it was hanging on me until i met the GOD sent loan lender that changed my life and that of my family, a GOD fearing lender, Mr Rich Skipper, he was the Savior GOD sent to rescue my family and at first i thought it was not going to be possible until i received my loan of $ 250,000 USD on the 25th/jun/2015 and i will advise any one who is in genuine need of a loan to contact Mr.Rich Skipper via eMAIL: { forester.financing.services808@gmail.com }, because he is the most understanding and kind hearten lender.

  • Salome Njeri Njoki

    TESTIMONY ON HOW I GOT MY LOAN FROM A GENUINE LOAN COMPANY{ forester.financing.services808@gmail.com } nnHello everyone, My name is Mrs,Salome Njeri Njoki, am writing this testimony because am really grateful for what Mr. Rich Skipper, did for me and my family, and i told my self that any lender that rescue my family from our poor situation, i will tell the name to the whole wild world and i am so happy to say that my family is back for good because i was in need a loan of $ 250,000 USD to start my life all over and pay my bills, as i am a single mum with 4 kids, and the whole world seemed like it was hanging on me until i met the GOD sent loan lender that changed my life and that of my family, a GOD fearing lender, Mr Rich Skipper, he was the Savior GOD sent to rescue my family and at first i thought it was not going to be possible until i received my loan of $ 250,000 USD on the 25th/jun/2015 and i will advise any one who is in genuine need of a loan to contact Mr.Rich Skipper via eMAIL: { forester.financing.services808@gmail.com }, because he is the most understanding and kind hearten lender..

  • Salome Njeri Njoki

    TESTIMONY ON HOW I GOT MY LOAN FROM A GENUINE LOAN COMPANY{ forester.financing.services808@gmail.com } nnHello everyone, My name is Mrs,Salome Njeri Njoki, am writing this testimony because am really grateful for what Mr. Rich Skipper, did for me and my family, and i told my self that any lender that rescue my family from our poor situation, i will tell the name to the whole wild world and i am so happy to say that my family is back for good because i was in need a loan of $ 250,000 USD to start my life all over and pay my bills, as i am a single mum with 4 kids, and the whole world seemed like it was hanging on me until i met the GOD sent loan lender that changed my life and that of my family, a GOD fearing lender, Mr Rich Skipper, he was the Savior GOD sent to rescue my family and at first i thought it was not going to be possible until i received my loan of $ 250,000 USD on the 25th/jun/2015 and i will advise any one who is in genuine need of a loan to contact Mr.Rich Skipper via eMAIL: { forester.financing.services808@gmail.com }, because he is the most understanding and kind hearten lender…

  • Salome Njeri Njoki

    TESTIMONY ON HOW I GOT MY LOAN FROM A GENUINE LOAN COMPANY{ forester.financing.services808@gmail.com } nnHello everyone, My name is Mrs,Salome Njeri Njoki, am writing this testimony because am really grateful for what Mr. Rich Skipper, did for me and my family, and i told my self that any lender that rescue my family from our poor situation, i will tell the name to the whole wild world and i am so happy to say that my family is back for good because i was in need a loan of $ 250,000 USD to start my life all over and pay my bills, as i am a single mum with 4 kids, and the whole world seemed like it was hanging on me until i met the GOD sent loan lender that changed my life and that of my family, a GOD fearing lender, Mr Rich Skipper, he was the Savior GOD sent to rescue my family and at first i thought it was not going to be possible until i received my loan of $ 250,000 USD on the 25th/jun/2015 and i will advise any one who is in genuine need of a loan to contact Mr.Rich Skipper via eMAIL: { forester.financing.services808@gmail.com }, because he is the most understanding and kind hearten lender….

  • Salome Njeri Njoki

    .TESTIMONY ON HOW I GOT MY LOAN FROM A GENUINE LOAN COMPANY{ forester.financing.services808@gmail.com } nnHello everyone, My name is Mrs,Salome Njeri Njoki, am writing this testimony because am really grateful for what Mr. Rich Skipper, did for me and my family, and i told my self that any lender that rescue my family from our poor situation, i will tell the name to the whole wild world and i am so happy to say that my family is back for good because i was in need a loan of $ 250,000 USD to start my life all over and pay my bills, as i am a single mum with 4 kids, and the whole world seemed like it was hanging on me until i met the GOD sent loan lender that changed my life and that of my family, a GOD fearing lender, Mr Rich Skipper, he was the Savior GOD sent to rescue my family and at first i thought it was not going to be possible until i received my loan of $ 250,000 USD on the 25th/jun/2015 and i will advise any one who is in genuine need of a loan to contact Mr.Rich Skipper via eMAIL: { forester.financing.services808@gmail.com }, because he is the most understanding and kind hearten lender.

  • Salome Njeri Njoki

    .TESTIMONY ON HOW I GOT MY LOAN FROM A GENUINE LOAN COMPANY{ forester.financing.services808@gmail.com } nnHello everyone, My name is Mrs,Salome Njeri Njoki, am writing this testimony because am really grateful for what Mr. Rich Skipper, did for me and my family, and i told my self that any lender that rescue my family from our poor situation, i will tell the name to the whole wild world and i am so happy to say that my family is back for good because i was in need a loan of $ 250,000 USD to start my life all over and pay my bills, as i am a single mum with 4 kids, and the whole world seemed like it was hanging on me until i met the GOD sent loan lender that changed my life and that of my family, a GOD fearing lender, Mr Rich Skipper, he was the Savior GOD sent to rescue my family and at first i thought it was not going to be possible until i received my loan of $ 250,000 USD on the 25th/jun/2015 and i will advise any one who is in genuine need of a loan to contact Mr.Rich Skipper via eMAIL: { forester.financing.services808@gmail.com }, because he is the most understanding and kind hearten lender..