Dave Ramsey Said, ‘You Don’t Need a Credit Score to Thrive’ and He’s Kind of Correct, but Not Entirely

Dave Ramsey is a well-known financial guru who has given some very good advice to people. However, there’s a lot of disagreement about certain aspects of his philosophy. Specifically, Ramsey is very anti-debt, and he does not believe that most people should borrow for much of anything, except for their home with an affordable 15-year mortgage if they can’t pay cash. 

Since Ramsey isn’t a fan of borrowing money, he believes that you do not need a credit score to thrive. He’s explained that those who borrow more end up with better credit, so earning a good score isn’t a measure of financial success and isn’t even really something to work towards.  Instead, he described a credit score on Facebook as an “I love debt” rating.

Although there is some validity to what Ramsey said, there are also some serious issues with it. Here’s what you need to know. 

Here’s why Ramsey is right that you don’t need a credit score to thrive

Ramsey believes that your credit score doesn’t matter much, because all a good score does is open up the door to taking on more debt. He’s also argued that if you need to borrow for important purchases, such as for a house, you should be able to do so regardless of your credit if you find a lender that does “traditional” underwriting. Traditional underwriting is looking at your total financial credentials, rather than focusing on borrowing history.

Now, Ramsey is right that the biggest benefit of a credit score is easy access to new credit. He’s also correct that you are rewarded with a higher credit score for borrowing. Payment history, credit utilization ratio, and types of credit are two important components in the credit scoring formula. You’ll need to borrow to have a positive payment history, will be rewarded for having both credit cards and installment loans you pay over time, and will have a better score if you have lots of credit available (as long as you aren’t maxing out your cards). 

He’s even correct that some lenders do traditional underwriting, although it is definitely a lot harder to find one willing to give you a loan if you have no credit score because of your unwillingness to borrow.

So, under the right circumstances, you can get by without a credit score. And, if you are investing a lot and making smart, careful money choices as part of your debt-free life, you may even be able to thrive with no credit. 

There are some serious downsides to not having a good score

Although thriving is possible without good credit, not having a good score can make life harder and more expensive. You’ll have fewer choices of lenders for a mortgage and car loan,s and will probably end up with a higher interest rate since you don’t have a solid credit score to show you’re a trusted borrower.

Insurance companies and utility providers and landlords look at credit too, so you may pay higher premiums, higher deposits, and have a harder time finding a rental property. 

There’s also, for most people, no reason not to pursue earning a good credit score. Yes, you do have to borrow to earn a good score, but that does not mean that you have to pay interest. You can sign up for a credit card, charge purchases to get your rewards, and pay your balance in full. If you make payments on time and keep your credit utilization ratio to less than 30% of credit available, this should be enough to build pretty good credit over time.

Unless you have no control over your spending and truly think you can’t manage to stay out of debt if a credit card is available to you, you should look around for a good cash back card that will give you money back for your purchases. Then, you should sign up for that card and begin using it responsibly to build credit. There’s no downside to doing this, and despite what Ramsey says, the benefits could be substantial over time.