Dave Ramsey Says Credit Scores Are Just 'I Love Debt Ratings' And Insists They Are In No Way An Indication Of Wealth — 'Our Culture Worships At The Altar Of The FICO Score'

Credit scores are often hailed as the ultimate indicator of financial health, but renowned financial adviser Dave Ramsey challenges this conventional wisdom with a thought-provoking statement. 

In a Feb. 2 Instagram post, Ramsey said, “Here me clearly on this: The credit score is NOT a measure of winning financially. It is 100% based on debt. The credit (or FICO) score is simply an ‘I love debt’ rating. No part of the credit score calculation even hints at how much wealth you have.”

But what does Ramsey mean by this, and why does he emphasize that credit scores are not synonymous with financial success?  

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Ramsey’s perspective on credit scores goes beyond the numerical value assigned to an individual’s creditworthiness. He challenges the prevailing notion that a high credit score equates to financial prosperity. 

On numerous occasions, he has posted his dislike for credit. In a 2021 Instagram post, he highlighted a common question from a person asking whether they should take out a credit card to build their credit. His response was: "Nope! Don't play the credit score game. Our culture worships at the altar of the FICO score, and we've got to stop it. It's a system invented by banks to make you think you need a high credit score in order to buy anything. That's NOT TRUE." 

Instead of being so focused on a score, his approach to credit scores and financial health emphasizes the importance of living within one’s means, rather than relying on credit. He advocates for a life free of debt, suggesting that people should focus on paying off their existing debts and avoiding new debt. Instead of working to boost your score, let your credit score "dwindle until it's completely extinct," he said.

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His approach, as detailed on his Ramsey Solutions website, illustrates the practicality of making significant life purchases without relying on credit. He paints a vivid picture of a scenario many find familiar: the moment at a car dealership when the salesperson says they need to check your credit score. 

Ramsey flips this scenario on its head, suggesting instead that you can walk into the dealership with confidence and cash in hand. When confronted with the usual spiel about credit checks, you can confidently respond, “No need — I’m paying in cash.” This response, according to Ramsey, is a powerful declaration of financial freedom, illustrating the advantages of living without credit.

While Ramsey’s advice may resonate with those seeking to avoid debt and live within their means, it’s important to consider the broader implications of completely disregarding your credit score. In many situations, a good credit score can provide benefits such as lower interest rates on mortgages and other loans, better terms on insurance policies and advantages in job and rental applications. While Ramsey’s philosophy offers valuable insights into achieving financial freedom and reducing reliance on debt, people should weigh the potential benefits and limitations of ignoring their credit score in a credit-driven economy.

Whether you choose to follow Ramsey’s advice may depend on your personal financial goals, current financial situation and views on debt and credit. Consulting with a professional financial adviser can provide tailored advice, taking into account your financial situation, goals and challenges. 

Financial advisers can help with a range of services, including debt-management strategies, investment advice, retirement planning, tax planning and understanding the implications of credit scores on various aspects of your financial life. They can offer insights into how to balance the approach of minimizing debt while also optimizing your credit profile for times when borrowing becomes necessary, such as securing a mortgage with favorable terms.

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*This information is not financial advice, and personalized guidance from a financial adviser is recommended for making well-informed decisions.

Jeannine Mancini has written about personal finance and investment for the past 13 years in a variety of publications including Zacks, The Nest and eHow. She is not a licensed financial adviser, and the content herein is for information purposes only and is not, and does not constitute or intend to constitute, investment advice or any investment service. While Mancini believes the information contained herein is reliable and derived from reliable sources, there is no representation, warranty or undertaking, stated or implied, as to the accuracy or completeness of the information.