Is Dave Ramsey Wrong About Credit? Here’s What 3 Experts Say
One of Dave Ramsey’s most controversial opinions is his stance on credit usage. He advises against using credit and argues that credit scores are not a true measure of financial health. Instead, he describes them as how well you “play kissy-face with the bank.” According to Ramsey, credit scores simply do not matter.
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“A credit score is nothing but an ‘I love debt’ score,” Ramsey wrote in a 2020 Facebook post. “It’s proof that you’ve borrowed money and paid it back, so that you can borrow more money and pay THAT back. And the cycle goes on forever. If you want a life without payments, stop chasing a life WITH payments … Don’t believe the LIE that you need a credit score. You’ll be just fine without one.”
But is his perspective on credit truly valid?
To find out, GOBankingRates interviewed several experts. Here’s what they had to say.
Is Dave Ramsey Wrong About Credit?
The experts GOBankingRates interviewed weren’t in agreement with Ramsey’s views about credit. Here’s why.
Creditworthiness Matters Greatly
Daniel Cohen, consumer protection attorney and founding partner of Consumer Attorneys, believes Ramsey’s opinion about credit is a bit elitist. He said whether you like it or not, every major financial event in your life is heavily impacted (if not fully dictated) by your creditworthiness.
“Someone wealthy may not have to worry about whether they have access to or can use credit for needs beyond a home mortgage, but most consumers do,” he said. “If you’re rich, maybe you don’t need credit to buy a car because you can write a check for $40K while finishing your $7 latte. But the average consumer doesn’t necessarily have that luxury.
“Having access to well-played credit enables you to pay for purchases that you can’t afford out of pocket by breaking it down into monthly installments. And demonstrating that you can handle credit, pay off debts and be responsible grows your credit score, which gives average consumers access to better opportunities.”
Cohen said that because credit ratings aren’t tied to income, people who don’t make huge salaries might still be able to access the best interest rates and loan terms if they have a great credit score.
“It can be an equalizer in that respect,” he said. “Being responsible with credit can earn you a certain level of financial clout in the credit industry, even if your earnings are lower. You have to be smart, of course, not reckless. That’s the key. But I think embracing credit and learning to use it strategically to your advantage is a better approach than eschewing it altogether.”
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America Is Credit-Dependent
Consumer finance expert Bill Westrom, who is the CEO and founder of Truth in Equity and Credit Line Banking, has a similar view to Cohen’s.
“In 2024, credit is mandatory if you intend on getting a college education, drive a decent car and own a home. Without credit, we don’t get to live the American dream, and more importantly, we don’t have an economy.
“Credit itself isn’t the problem; it’s the terms of repayment. Terms of repayment isn’t something Dave, or anyone else for that matter, is paying attention to.”
Avoiding Credit Is Not Realistic
Stephen Kates, CFP, principal financial analyst for Annuity.org, said that at best, Ramsey’s opinion is meant primarily for entertainment and attention, and at worst, it’s out of touch and demonstrates a serious lack of understanding of our modern financial ecosystem.
“Avoiding credit is not a realistic way to manage your personal finances given the pervasive use of credit scores within our economy,” said Kates. “Without credit, you may be rejected [from financing purchases] or, at best, receive a higher-than-average interest rate.”
How To Use Credit Wisely
Cohen said you should use credit to improve your credit scores, give you access to the best financial terms and opportunities and access things you need but can’t afford to pay in full right now.
“The best advice for using credit to achieve these goals is to be savvy and slow,” he said. “Never make rash, on-the-spot decisions to authorize a credit check (like a store card at the register) or enter into a loan agreement for something at the same moment you decide you need it. Closely monitor your credit reports. Pay attention to the details (like interest rates, APRS and repayment periods).
“Take advantage of great offers that come your way as your credit score increases but do it in a savvy way. For instance, if you get an offer for a 0% APR credit card, try negotiating with your current carrier for a lower interest rate. If they won’t match 0% APR, they may consider a significantly better deal to entice you to stay. Now you’ve avoided the credit hit from opening a new trade line and you’ve improved your terms.”
How To Handle Debt
Westrom said you should handle debt for as short a time as possible.
“When it comes to debt, time is the enemy, not the interest rate,” he explained. “The expense and burden of debt only exist as long as the debt exists.
“Traditional financial advice also needs to get up to speed. Long-term, low-interest-rate debt is still expensive and ultimately controls our financial future. There is no good reason to hold on to debt. Handle debt like an investment, but in reverse. Focus on repaying back as fast as possible and all credit issues disappear. The faster you pay off debt, the more you will have to save and invest for your future.”
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This article originally appeared on GOBankingRates.com: Is Dave Ramsey Wrong About Credit? Here’s What 3 Experts Say