10 Myths about credit scores, but ...

A former FICO exec shares 10 myths about credit card scores. It's interesting that in order to have a good score, you have to have debt. Closing credit card accounts will not help you score.

Dave Ramsey repeatedly says he will not worship at the altar of FICO and calls the credit score an "I love debt" score.

Below is a question posed to Ramsey by a caller (or you can listen to Dave's response here):

Question: Caleb has had credit problems in the past, but has tried to clean them up. He wants to buy a house and wonders how he can improve his credit score.

Dave Ramsey's advice: Pull a copy of your credit score and make sure you have no outstanding bad debt or unpaid debt. The second thing that could cause your score to be bad is past debts that have been paid but are still on there. Remember, you don't have to have a credit score to get a house. You have to have cleaned up your bad debts, but if you find a mortgage company that does manual underwriting and can verify that you've paid your bills on time, then you qualify for a premium mortgage. You don't want to spend your life building your FICO score, because it's just an "I love debt" score.

You can also listen to Dave go off about credit scores here.

Another thing to keep in mind, as pointed out on the video, is that your credit score is used for other things (some employers check it, landlords will and some insurance companies offer better rates to those with good credit scores).

So simple, yet so true

Here is a funny skit from Saturday Night Live that Dave Ramsey pointed out: Don't buy stuff you cannot afford.

I have not always made the best financial decisions, but I have been getting better with the help of Dave Ramsey's Financial Peace University classes. If only our politicians would get it into their heads about not buying stuff unless you can afford it.

Enjoy.

A little plastic surgery

My wife and I are working toward eliminating debt and have started operating on a cash basis. Here is video from Dave Ramsey talking about how credit cards have not propelled us toward wealth and how some families have chosen to get rid of those credit cards, aka plastic surgery.

Brother, can you spare a dime?

Consider this:

A friend of yours gets paid and blows his paycheck. So, he asks his family for some money, and they reluctantly agree. Because he spends more than he earns, the family never sees their money again.

Well, your friend is still wasting his money and has nothing to show for it. So, now he looks to borrow from his friends. Despite their apprehension, they cough up some money for him. As is his nature, he blows the money and continues to live beyond his means.

For some unknown reason, a credit card company decides to take a risk on your friend and sends him a pre-approved credit card. He runs it up and gets behind on his payments. Another credit card company gives him a line of credit, and he maxes it out and defaults on his payments.

Now, let me ask you this: Is it in the best interest of your friend to get another credit card? borrow more money? take out a loan? Will going further into debt help out his situation?

If it is not in his best interest, then why is it in our country's best interest to go into debt by another $800 billion?