Gather Little by Little

Dave Ramsey has done well for himself as a financial advice guru. He was one of the first people to recognize that our culture is steeped in debt, dependent on debt and that debt was enslaving the American culture. Ramsey has not been successful in changing our cultural dependence on debt, however, there are many individuals and families who owe him a great deal when it came to turning their financial house around. One of Dave Ramsey’s more controversial pieces of advice deals with FICO scores, also known as a credit score. Ramsey has said things such as: your credit score is an “I love debt score” and, Americans today are “worshiping at the altar of the FICO score.” He downplays the importance of a credit score on a regular basis and emphasizes his strategy of paying cash for everything.

I think that if you have had the misfortune of going into debt, a certain amount of credit score maintenance is necessary. My credit score has been checked by potential landlords, insurance companies and potential employers. Since credit was a big part of the last ten years of my life, I don’t want them to check my credit report and see bad news. I like my high credit score, but I do not plan to use it for financial credit ever again . . . I hope.

I did not realize how much I had been affected by Ramsey’s advice until the other day when I told a friend of mine to not worry about his credit score and actually delay repayment of a loan. I think I gave the correct advice. Here is the scenario:

“Vince” is in his early thirties, no children, single and has a limited criminal record. About five years ago, he trusted in Christ and began to attend our church. Although there are some consequences from his past that pop up now and then, he has pretty much forsaken the influences and habits that hurt him during his twenties. For the past five years, Vince has been sober, faithful to church, hard working and stayed out of trouble. Lately though, he has run into a string of bad luck – lost his job due to the economy, has been unable to get into college, had to move back with his parents. Then, two weeks ago, he was in a car accident – not his fault – that left his only vehicle totaled. To make things even worse, Vince had not purchased “gap insurance” – not a mistake that he will make again – but the fact still remains. Vince has no job, very little money and now he owes $2,000 on a car that he cannot even drive.

Vince is struggling to pay his rent and even purchase food, yet in the aftermath of the accident, he was worried about his credit score that he had been carefully cultivating for the last five years. He told me that he thought he could partially settle the balance of the car loan using IRS tax refund of about $1,500 that he was due to receive this month. I made the following suggestion to him:

1. Forget the car loan for now.
2. Use the tax refund to purchase a $400 or $500 beater.
3. Save the balance of your refund to live on.
4. Get the best job that you can find – fast food, janitorial, whatever – hopefully within walking distance of your house.
5. Start paying on the loan again when you have regular income.
6. Never use a loan to pay for a car again.

Vince’s response to me was, “but won’t that kill my credit score?” I told him that it would, but right now, he has much bigger fish to fry than FICO. Vince was almost ready to go without food in order to “please” his credit monitoring service. I believe that God expects us to settle our debts. Not paying or refusing to make payments on money that has been lent to us is sin. Vince definitely needs to eventually finish paying off the car loan because it is the right thing to do, however, right now, the credit score can wait.

Article by Stew

Photo by Library of Virginia