So, in my efforts to be debt free and yet also have good credit, I've latched on to Dave Ramsey's financial advice and I have to say... I'm a bit confused. I want to purchase a car in the near future. He advises "buy it, don't use credit, no payments, own it clear and free".... but I've also been advised that having an auto loan, and ofcourse paying it on time, is one of the best ways to boost your credit score. What do you all think is the best middle ground. I do NOT want to lease, but yet, I do think having a small auto loan will benefit me in my goal to have excellent credit. Is credit really the devil? Will getting an auto loan hurt in the long run, in my efforts to be debt free...? I'm very conflicted and I'm not sure which way to go. Hope you all can shine some light.
Thanks for your help.
EE
Starting Score: 575
Dave Ramsey has some good points, however he has some off the wall things to, it's up to you to decide what's best for you.
My advice?
Get credit if you need it. If you don't need a car, don't get a car loan. If you don't need to borrow money, don't do it. If you can pay cash for a vehicle, then by all means, do that.
You can get a good credit score WITHOUT going deep into debt.
You can use CCs, use them occassionally, or often, and pay the bill in full. Don't waste money on things you don't need to!
Anyway, just my thoughts on the matter, what do I know? 
July 2013 score: EQ FICO 819, TU08 778, EX "806 lender pull 07/26/2013
Goal Score: All Scores 760+, Newest goal 800+
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Current scores after adding $81K in CLs and 2 new cars since July 2013
EQ:809 TU 777 EX 790 Now it's just garden time!
June 2017 update: All scores over 820, just pure gardening now.
I agree with the sentiments of the other posters. When buying a depreciating asset like a vehicle, buying with cash makes the most sense. Problem is 99% of people don't have the cash to buy a new car and a lesser percentage can buy a used vehicle with cash. Most of us have to finance. The next best thing is to build up as large a down payment as you can then with your trade-in value, purchase a vehicle that is right for your budget.
A lot of people suggest buying a vehicle that is only 1 or 2 years old and relatively low mileage since a vehicle depreciates the most in those years. If you need to get an auto loan be sure you don't stretch the amortization out beyond the value of your vehicle. In other words, if at any point in your paying the loan that your vehicle is worth less than what you owe, you are in an upside down position. It is absolutely crazy when I see people lining up to pay off a new car in 6 or 7 years! Heck some cars may not even last that long without proper maintenance. Hence, they higher the down payment, the more positive your postion on the vehicle's net worth is and if you chose to resell the vehicle you can at least recoup part of the value.
Leasing is an option but should only be for those who like to swap out for new vehicles every few years and don't want to pay for any repairs. I tried it a couple of times and regretted it since there is no way to build up equity that you can use on trading it for your next vehicle. The payments may be cheaper but you have zilch at the end of the contract.
Lastly, a credit score is a tool. It is not the be all and end all of your financial health and it isn't worth chasing the tail of a credit score just to get a higher number. Concentrate on your own personal financial situation and let the credit score be. I know that sounds like heresy on a forum dedicated to understanding and growing the score, but in the end we all just want good financial health don't we? Sure let's do what we can to fine tune our scores but don't turn your financial world on its head to do so.
Have a good day!
Starting Score: EQ 732 October 2007; Current Score: EQ 839; TU 865, July 2022;
I know this thread is several months old but I just read something about Dave Ramseys "I LOVE DEBT" score, apparently his take on FICO.
I don't know a lot about Ramsey's system but if you follow his advice on paying cash for everything and avoiding credit, I think you are missing out on some good stuff. I would follow his advice certainly if you can't manage your credit and keep your util down.But if you have learned to master credit and how to keep your FICO scores in good standing, why not have a good rewards card for groceries and gas and another for cash back. Why not finance a car at 0% if you can qualify for that and collect interest on the money you would have otherwise given to the dealer?
It seems to me there is a lot of opportunity that using (not abusing) credit provides. Does his system present this at any point?
