Why You’re Wrong About Your Credit Score

Today we will learn the truth about credit scores and why they aren’t a reliable measure of success.
Links:
Read: How to Pay Off Debt
Watch: How I Bought A House With No Credit Score

George Kamel is a personal finance expert and co-host of The Ramsey Show. Following Ramsey’s proven money plan, George went from negative net worth to a millionaire in under 10 years. His goal is to help people spend less, save more, and avoid money traps so they can live a life with more margin, options and freedom.

This channel will simplify complex money topics, bust money myths with actual facts, and debunk the stupid financial advice you're seeing in your social media feed. All with a healthy dose of pop culture, humor, and snark.

[punkbassandcovers]

Hey baby look at my credit score, and my brand new $1400 truck payment...for which I use to haul mulch twice a year and to compensate for other areas in which I lack.

[Qotus]

Here in Finland there is no such thing as a credit score. There is a register where you can see if someone has payments in collections, have gone bankrupt or have been deemed to neglect payments in court, but nobody give you a score. Having multiple credit cards is actually considered a risk, not an asset!

[LeiaAOS]

I love the way Dave refers to it as an “I LOVE DEBT” score. Excellent video. If only everyone in the world understood this.

[nathanwestford]

Times are uncertain, the market is out of control, and banks are gradually failing. I was really hopeful of my investments this year, but all my plans have been disoriented, I've been studying the stock market and I realized some investors made a fortune from the recent recession and I was wondering if such success rate could be achieved in this present market. Any recommendations?

[rossmcgregr]

I'll give you credit for this one, George.

[ramsaraswat]

Love this, George and your work! I just started following Ramsey and love your advice. Do you have any resource/partners for Canada?

[JpivotalBurcham]

Do you want to get rid of NEGATIVES on your credit report in 14 days?

[joeandjoeable]

The one thing I would say is. As someone who is young, and wanting to try a house young, but wont be able to save up more than 15% or so, wouldn't a credit score give me the best rate. As someone who had a 760 and no debt, meaning it is only rising over time. Wouldn't it be best to just keep not having debt, raise my credit score, and use that rate instead of risking a higher rate with manual underwriting?

[ovidbowie]

Fight the power and speak the truth, G-dawg

[KevinWilliams-ov]

Insurance agent here. Having a good or bad credit score affects your auto and home insurance rates significantly!! Someone with a low credit score can end up paying thousands more a year. Having a high credit score and being financially responsible are not in competition with one another.

[Pillarblue]

Recently paid off one of my student loans & credit score went DOWN 10 pts - I see their game.

[funtechu]

Going to add another point from my perspective. I grew up on Dave Ramsey and was convinced that the credit score was not required for anything. I successfully rented cards, and was able to rent with no score. But then several years ago I got slapped into reality when I was moving and found that no place in the new city would rent to me because my credit score was indeterminate. I ended up finding a place that would rent to me but they required a double deposit, were in a worse location, and cost more per month than some of the other places I had been looking at.
TL:DR; having a good credit score gives you options, and in my case the opportunity cost of not having it was incredibly high. Plus, to get a perfect credit score is incredibly simple and doesn't require ever paying a dime in interest. Just get a credit card with a low limit, put an expense that you are not going to overpay for on it (like gas), and pay it off in full every month. Within a year you'll have a score > 740 which is considered a perfect score for all purposes.

Anyway, just beware of this, especially if you are young or still renting. I love Dave, but this is an area where he is just plain wrong on the practical side of things. I would love a world where you don't need a credit score to rent. But unfortunately that's not the world we currently live in.

[yvonneh.]

Car insurance rates are based off your credit score too.

[conorstanage]

Here in the UK our credit scores are marked out of one thousand.

I have ZERO idea why my score is so high because I never use credit.

I use the "twice/once" rule before a purchase: if I can't pay for it is twice, I don't buy it once - using cash.

So if an item is £100, I'd better have £200 in my wallet. Works for me!

[Executor]

That debt to cocaine bear analogy was spot on.

[cedricatmoore]

Great Video! And A Great Reminder! Thank You George! God Bless You, your team and all at Ramsey solutions!

[blandlinda]

Very proud to announce that I do not have a FICO score. 👍🏻🙌🏻👏🏻

[gainesville]

While I do agree that the credit score is a broken score system that relies on debt payments, I still use credit cards to earn cash back. I’m a meticulous budgeter, and I only use my cards when I know I can afford to make my purchase in cash, which allows me to earn money back from purchases I would’ve made regardless of the payment method I used. Just this year I received almost $700 in cash back, where I would’ve received nothing if I were to use my debit card (which I only use to get cash from an ATM)

[libertarian]

I have a credit score well over 800. I use a cash back credit card for all purchases. I have paid $0 in interest and fees in 40 years. I have no real debt, and am a multimillionaire many times over. You don't need to be "in debt" to have an extremely high credit score.

[Py]

I know. I don't need it, but I like it.