topic Re: Dave Ramsey says FICO is "Stupid" ???? in Personal Finance

Dave Ramsey says FICO is "Stupid" ????

Anonymous — Sun, 09 Jan 2022 23:22:34 GMT

I have posted on here for a lil while now. My assistant came to work crying that she saw this clip and she wants to buy a house but Dave Ramsey says to buy it for cash and FICO is stupid and not to go with a mortgage.

I understand her frustration as she is paid $75,000 a year and will never be able to buy a house for cash. She directed me to this video of Mr Ramsey and wanted my opinion. I told her that I am a firm believer in FICO, what it stands for and how it works. Since I am biast I told her that I would post it on here and in some time when there are enough responses that I will print it and give it to her for her to decide.

I think Dave Ramsey is giving bad advice and can ruin peoples lives. But here is the video of him. Please honest opinions. I really want her to buy a house NOW and not in 60 years LOL

Thanks

Mark

Re: Dave Ramsey says FICO is "Stupid" ????

tortoise_credit — Sun, 09 Jan 2022 21:53:56 GMT

When you can write a check and buy the whole apartment complex, you probably don't need a FICO score. However I would be surprised if Dave doesn't have any mortgages for the many real estate properties he owns. Using debt wisely, it becomes just another tool to wealth.

As is commonly said, Dave Ramsey is basically AA for debt-aholics. One you're out of debt it's best to seek the advice of others.

And of course he is quite wrong that you must pay interest to have a high score.

Re: Dave Ramsey says FICO is "Stupid" ????

SoCalGardener — Sun, 09 Jan 2022 23:00:33 GMT

@Anonymous wrote:
I have posted on here for a lil while now. My assistant came to work crying that she saw this clip and she wants to buy a house but Dave Ramsey says to buy it for cash and FICO is stupid and not to go with a mortgage.

I haven't watched [and don't intend to] the video, but wanted to say this: I think it's ludicrous to think that most people can just write a check for a house. I have no idea where Ramsey lives or if he's familiar with housing costs in various areas, but he needs a reality check!

Here in California, housing prices are extremely high. In Los Angeles county, even factoring in the crappy areas that includes, the median price for a house is almost $800,000. In my neighborhood, median is somewhere around $2.8M. Yes, houses in my neighborhood routinely sell for cash, but I don't think that's the norm when you're talking about all neighborhoods, and all income brackets, across the country.

I'm guessing that Ramsey is blessed with financial resources that allow paying cash for a house. But when the majority of Americans state that they would be unable to cover a $400 emergency expense--four hundred dollars!!--I think it's pretty unrealistic that they can buy a house for cash.

FICO definitely has its problems, but nothing is perfect. It does a pretty good job of what it's intended to do, and if Ramsey doesn't like it, fine, but he shouldn't misinform/misguide people with biased opinions that are based on his own financial status. Just because he doesn't need to worry about FICO scores and can buy a house with cash doesn't mean everyone can.

Re: Dave Ramsey says FICO is "Stupid" ????

Remedios — Sun, 09 Jan 2022 23:25:08 GMT

@Anonymous please do not link to that channel.

You're on credit card forum assuring anti-credit fanatic increases views.

If anyone wants in that cult, it's an easy search.

Re: Dave Ramsey says FICO is "Stupid" ????

ghgirll40 — Sun, 09 Jan 2022 23:48:43 GMT

Dave Ramsey is anti borrowing money and I think if you are trying to get out of debt he can be a good resource. For mortgages he advocates for 15 year fixed at 25% of your monthly income as a payment amount. His point of view is to own the house so it doesnt own you. His ideas have been helping me get out of debt and into a more affordable lifestyle for myself but I will always have 1 credit card and I think as long as your monthly payment for a car or house isnt ridiculous for my income Im not against that either. I have to admit though I dont see him discussed on this forum much lol.

Re: Dave Ramsey says FICO is "Stupid" ????

CreditInspired — Mon, 10 Jan 2022 00:27:07 GMT

I'm sorry but I am trying to figure out why your assistant was crying. So, ok, she heard Dave Ramsey say buy a house for cash. AND?

I'm 69 yo and don't know a single person--relative, friend, coworker--who paid all cash for a house. Over my various careers, I've been a Realtor for 10 years, and again, not one all-cash buyer. Now, I know it happens, but it's not the majority.

So my question, and what I don't understand, is why is she solely invested in one man's theory so much so that she is crying. Why didn't she ask her relatives, her friends, her parents, her coworkers if they purchased their houses using all cash.

I think the best thing you should have told her is to read, read, and read some more on the many ways there are to buy a house.

Re: Dave Ramsey says FICO is "Stupid" ????

Anonymous — Mon, 10 Jan 2022 00:36:37 GMT

@CreditInspired wrote:
I'm sorry but I am trying to figure out why your assistant was crying. So, ok, she heard Dave Ramsey say buy a house for cash. AND?

I'm 69 yo and don't know a single person--relative, friend, coworker--who paid all cash for a house. Over my various careers, I've been a Realtor for 10 years, and again, not one all-cash buyer. Now, I know it happens, but it's not the majority.

So my question, and what I don't understand, is why is she solely invested in one man's theory so much so that she is crying. Why didn't she ask her relatives, her friends, her parents, her coworkers if they purchased their houses using all cash.

I think the best thing you should have told her is to read, read, and read some more on the many ways there are to buy a house.

It's hard to understand since I did not post the entire story but you picked up on it. She wants the house, the husband does not. So he is using Dave Ramsey's advice to his favor.

She can get a 1,200 sq foot new house here for just around $300K brand new. A year ago they where $140K. So the husband is against buying now. They have a combined income of $115K so they can afford the house. The husband just does not want to pay the current prices. He realized he missed the boat a year ago when she wanted to buy and he stopped it.

Other then myself and a few I spoke to on here most others purchased with a mortgage. With todays now rates I can see why. But I am too old to go that route myself LOL.

The market here is just gone crazy. Houses get listed and the same day there are a dozen offers on them. When will this end?

Thanks

Mark

Re: Dave Ramsey says FICO is "Stupid" ????

Anonymous — Mon, 10 Jan 2022 00:37:46 GMT

@Remedios wrote:
@Anonymous please do not link to that channel.
You're on credit card forum assuring anti-credit fanatic increases views.
If anyone wants in that cult, it's an easy search.

Understood

Thanks

Mark

Re: Dave Ramsey says FICO is "Stupid" ????

SoCalGardener — Mon, 10 Jan 2022 02:08:43 GMT

@CreditInspired wrote:

I'm 69 yo and don't know a single person--relative, friend, coworker--who paid all cash for a house. Over my various careers, I've been a Realtor for 10 years, and again, not one all-cash buyer. Now, I know it happens, but it's not the majority.

So my question, and what I don't understand, is why is she solely invested in one man's theory so much so that she is crying. Why didn't she ask her relatives, her friends, her parents, her coworkers if they purchased their houses using all cash.

Just goes to show what a variety of people we have here! EVERYONE in my family paid cash for their houses--and all other real estate they bought. For example, my grandmother owned rental properties throughout Pasadena, both residential and commercial, in addition to her personal homes, and paid cash for every single one of them. When my husband and I got a mortgage to buy our house, that was a first in my family!

Where I live, it's very, very common for houses to be purchased 'all cash'--and I get unsolicited offers all the time to sell my house. I own it outright; its current valuation varies from $1.7M to $2.5M, depending on various factors--but the one thing I can guarantee is that if I sold it, the entire property would be razed as soon as the new owner took possession. In its place would go a gigantic, ridiculously-oversized-for-the-property McMansion.

The entire street I grew up on is unrecognizable now; the beautiful, sprawling California ranch houses have all been replaced by Gothic columns, dolphin fountains, and other silly things that make my blood boil. Sorry, I'm letting myself get carried away--this is one of my big pet peeves. The house directly across from mine was demolished a few years ago, replaced by a hideously-oversized McMansion.

People pay cash--in the millions--to buy a house, then pay several *more* millions to raze it and have a new house put up in its place. I'm aware that this isn't the norm nationwide, but it is where I live. Since I'm adamant that I'll NEVER sell my house, I can see how 20, 30 years from now, it'll look like a little pea in a sea of grapefruits! (I've stipulated in my trust that my daughter cannot sell it, except under very specific--and VERY unlikely--reasons, such as the neighborhood turning into a slum.)

Re: Dave Ramsey says FICO is "Stupid" ????

Junejer — Mon, 10 Jan 2022 02:35:38 GMT

Easy for Dave to say when he makes $60MM per year selling his "debt and credit is stupid" programs. He equates credit and debt. We all know that the two aren't necessarily the same, though there is the potential for them to be. I started listening to Dave when I was in college. I learned to "eat the meat and spit out the bones" with his extremely radical advice.

Re: Dave Ramsey says FICO is "Stupid" ????

increasingmyfico — Mon, 10 Jan 2022 04:19:23 GMT

I stumble upon a lot of Dave Ramsey's posts. His advice is great if you live in 1952. For those of us in 2021 not so much. Paying cash is counterproductive to accumulating wealth.

Re: Dave Ramsey says FICO is "Stupid" ????

Anonymalous — Mon, 10 Jan 2022 09:22:45 GMT

@SoCalGardener wrote:
@CreditInspired wrote:

I'm 69 yo and don't know a single person--relative, friend, coworker--who paid all cash for a house. Over my various careers, I've been a Realtor for 10 years, and again, not one all-cash buyer. Now, I know it happens, but it's not the majority.

So my question, and what I don't understand, is why is she solely invested in one man's theory so much so that she is crying. Why didn't she ask her relatives, her friends, her parents, her coworkers if they purchased their houses using all cash.
Just goes to show what a variety of people we have here! EVERYONE in my family paid cash for their houses--and all other real estate they bought. For example, my grandmother owned rental properties throughout Pasadena, both residential and commercial, in addition to her personal homes, and paid cash for every single one of them. When my husband and I got a mortgage to buy our house, that was a first in my family!

My family tends to pay cash for houses and cars, as well. But that requires 1) reasonable income, 2) living below your means, 3) time, and 4) some ability to manage money.

Borrowing should be treated as a financial tool. Mortgages are a way of paying for something you can't afford in any reasonable time frame. And the interest rates are fairly low, so even if you could buy a house with cash, there's a good argument for taking on a mortgage instead. Because if you take the money you would have spent on the house and invest it, that should net you more money than just using the cash to buy it free and clear. But there's a certain freedom in owning something. And owning something doesn't mean you've forfeited the ability to take out a loan, because you can always use assets like a house as collateral (or stocks; that's how the really rich avoid taxes). People just should be aware that being in debt (leveraged is the same thing) is a risk. If inflation rises (fixed rate loans protect against this), or the asset's value tanks, or you lose a job or your investments aren't performing well so you can't afford the payments, then you can default and lose all you invested in the asset. It's the people who took out mortgages they could barely afford, or speculators who used leverage to buy real estate, who went bankrupt when the bubble popped in 2008. The people who owned their own homes, or speculators with minimal leverage, were fine.

FICO is important for people who don't have assets to borrow against.

Re: Dave Ramsey says FICO is "Stupid" ????

SoCalGardener — Mon, 10 Jan 2022 21:27:38 GMT

@Anonymalous wrote:
@SoCalGardener wrote:
@CreditInspired wrote:

I'm 69 yo and don't know a single person--relative, friend, coworker--who paid all cash for a house. Over my various careers, I've been a Realtor for 10 years, and again, not one all-cash buyer. Now, I know it happens, but it's not the majority.

So my question, and what I don't understand, is why is she solely invested in one man's theory so much so that she is crying. Why didn't she ask her relatives, her friends, her parents, her coworkers if they purchased their houses using all cash.
Just goes to show what a variety of people we have here! EVERYONE in my family paid cash for their houses--and all other real estate they bought. For example, my grandmother owned rental properties throughout Pasadena, both residential and commercial, in addition to her personal homes, and paid cash for every single one of them. When my husband and I got a mortgage to buy our house, that was a first in my family!
My family tends to pay cash for houses and cars, as well. But that requires 1) reasonable income, 2) living below your means, 3) time, and 4) some ability to manage money.

Borrowing should be treated as a financial tool. Mortgages are a way of paying for something you can't afford in any reasonable time frame. And the interest rates are fairly low, so even if you could buy a house with cash, there's a good argument for taking on a mortgage instead. Because if you take the money you would have spent on the house and invest it, that should net you more money than just using the cash to buy it free and clear. But there's a certain freedom in owning something. And owning something doesn't mean you've forfeited the ability to take out a loan, because you can always use assets like a house as collateral (or stocks; that's how the really rich avoid taxes). People just should be aware that being in debt (leveraged is the same thing) is a risk. If inflation rises (fixed rate loans protect against this), or the asset's value tanks, or you lose a job or your investments aren't performing well so you can't afford the payments, then you can default and lose all you invested in the asset. It's the people who took out mortgages they could barely afford, or speculators who used leverage to buy real estate, who went bankrupt when the bubble popped in 2008. The people who owned their own homes, or speculators with minimal leverage, were fine.

FICO is important for people who don't have assets to borrow against.

Indeed! I left home at 16, turning my back on my family's money; it was a calculated, conscious, informed decision that I have never regretted for a single moment--despite *horrible* financial problems, like being so broke we couldn't keep the lights on. My husband and I worked our butts off and were proud as can be when we bought our house--with a mortgage. I didn't care that no one else in my family had ever had a mortgage, *I* had managed this without my family's money and I was pleased as punch!

I think it's ridiculous to assume that everyone has the kind of money that allowed my family to pay cash for houses--and in very expensive SoCal, no less! I for one am very glad mortgages are available for those of us who need[ed] them. Now, looking at it from the other side, living in a house I own outright, I *love* the freedom of not owing a cent for my home. So I've seen both sides and appreciate both sides for what they are. I'm continually sent offers from known creditors, i.e., banks I already have a relationship with, like BofA and Discover, as well as places I've never done business with, offering home equity loans or HELOCs for 1.XX% interest. I shred them immediately. I've vowed that this house will never have a lien on it, so into the shredder they go! (But it is a nice reassurance that if I NEEDED money, I could easily get a million dollars or more just by signing some paperwork.)

Re: Dave Ramsey says FICO is "Stupid" ????

sarge12 — Mon, 10 Jan 2022 22:09:57 GMT

I think it is stupid to tell people not to take a mortgage for their house for the following reasons.

A) You have to live somewhere, an paying rent is not the best option because

B) If you pay rent, you are paying someone elses mortgage, and rent increases with inflation.

C) The mortgage payment in a fixed mortgage remains the same, so while the initial payment amount may seem high as far as DTI, in 10 or 15 years it will be lower.

D) Unlike any other debt, real estate tends to increase in value over time, creating equity.

E) Home ownership allows you to improve your surroundings by investing in home improvements, and if renting, even if the landlord would allow you to add that 2 car garage you would like, it would increase his property value.

F) All the advantages of a mortgage over renting leads me to believe that Ramsey or any other idiot advising such nonsense might recieve a sizable percentage of income from renting houses or apartments.

G) There is simply no other option available to the common man to own their own home. Having to pay rent prevents saving for a house.

H) Almost every large business that is built, is built with borrowed money. That expense is spread out over time, reducing the profits to be taxed, and building equity in the business. About the time one property is paid for, the business expands, adding or expanding properties.

I) I, along with most, could never have paid cash for anything more than a shack. That might have been the choice of the Unabomber, but most sane people prefer a decent house.

Re: Dave Ramsey says FICO is "Stupid" ????

sarge12 — Mon, 10 Jan 2022 22:40:54 GMT

@Anonymous wrote:
@Remedios wrote:
@Anonymous please do not link to that channel.
You're on credit card forum assuring anti-credit fanatic increases views.
If anyone wants in that cult, it's an easy search.
Understood
Thanks
Mark

I 100% agree...I suspect that financial gurus like Dave Ramsey get a lot of extra income from those who are ignorant enough to follow his advice, by renting them a house. The average citizen could not find a job within walking distance of their family home, so taking on some debt for transportation to a job was a necessity. The average citizen could not find a place to live rent free while they saved for a house, so getting a mortgage is better than paying the rent, which pays their landlords mortgage. Truth is, a loan to buy a car and a house, are about the only debts that are 100% justified fiscally. If he were pushing an only aquiring debt for necessities philosophy, I might begrudgingly agree with him. Dave Ramsey is making a fortune off the misery of his followers who could not responsibly manage their debts. Debt is a necessary part of supporting ones family. Buying the latest greatest cell phone, or an 80 inch QLED 8K television is a want. I strongly suggest using long term debt only for needs, such as a house, car, or maybe even some furniture.

Re: Dave Ramsey says FICO is "Stupid" ????

creditfan — Tue, 11 Jan 2022 00:58:01 GMT

I am curious and I wasted a few minutes of my time for it. Also, I noticed the "Like" counts is visible, but not the "Dislike".

Any good guess!!!

Re: Dave Ramsey says FICO is "Stupid" ????

increasingmyfico — Tue, 11 Jan 2022 01:58:47 GMT

@creditfan wrote:
I am curious and I wasted a few minutes of my time for it. Also, I noticed the "Like" counts is visible, but not the "Dislike".

Any good guess!!!

Because it is a cult

Re: Dave Ramsey says FICO is "Stupid" ????

Adkins — Tue, 11 Jan 2022 21:56:29 GMT

@increasingmyfico wrote:
@creditfan wrote:
I am curious and I wasted a few minutes of my time for it. Also, I noticed the "Like" counts is visible, but not the "Dislike".

Any good guess!!!
Because it is a cult

I'm not looking for the video because I'm not interested in watching, but if it's on YouTube, they changed YouTube so you can't see the "dislikes" anymore on the videos.

Re: Dave Ramsey says FICO is "Stupid" ????

brk1971 — Tue, 11 Jan 2022 21:30:51 GMT

Even pretending (and it takes a lot of effort to pretend) that purchasing with cash is something viable for the masses and that lending should be avoided at all costs... Dave's stated opinion on credit scoring misses several non-loan impacts of not knowing, establishing, and cultivating a healthy FICO score... among them:

Auto insurance - Even if you paid cash for your car, you need insurance, and not every state allows you to post your own bond with cash in lieu of insurance coverage... Bad FICO = higher rates.

Utilities (including cell phone) - Bad FICO = leaving a deposit on account at every utility / every time you move cellular providers, and being limited to only certain types of plans with many carriers.

Renter evaluation - Bad FICO = higher deposit or even rejection as a potential tenant.

There are many many industries that use FICO modeling as a decision making tool.

Re: Dave Ramsey says FICO is "Stupid" ????

Anonymalous — Wed, 12 Jan 2022 22:21:29 GMT

@brk1971 wrote:
Even pretending (and it takes a lot of effort to pretend) that purchasing with cash is something viable for the masses and that lending should be avoided at all costs... Dave's stated opinion on credit scoring misses several non-loan impacts of not knowing, establishing, and cultivating a healthy FICO score... among them:

Auto insurance - Even if you paid cash for your car, you need insurance, and not every state allows you to post your own bond with cash in lieu of insurance coverage... Bad FICO = higher rates.
Utilities (including cell phone) - Bad FICO = leaving a deposit on account at every utility / every time you move cellular providers, and being limited to only certain types of plans with many carriers.
Renter evaluation - Bad FICO = higher deposit or even rejection as a potential tenant.
There are many many industries that use FICO modeling as a decision making tool.

As someone who avoided credit for many years, most of those are manageable. Car insurance doesn't seem to have that big an impact. Not all utilities require a deposit, and when they do it's typically fairly small, and they usually give the deposit back in a year or so. It does limit your options when renting a place, but it's typically the big companies that are a stickler about it, and I prefer dealing with small companies or individuals, anyway. Note in these situations there may be a difference between no credit (I was an empty file/unscorable) and bad credit.

The biggest pains tend to be rental cars and hotels. I've managed fleets of vehicles, but couldn't rent one on my own. And hotels can be a hassle because they often require a signficant security deposit and it's not something they're used to dealing with, though that's still manageable.

The most important reason for most people to cultivate a healthy FICO score is a mortgage. Nothing else comes close.