Friday, September 21, 2007

Is Credit Necessary?

A Guest post by Lemony, a friend from a message board. She submitted her thoughts on credit, Dave Ramsey, and whether a score is important.

I'm a big fan of Dave Ramsey's Total Money Makeover. His no-nonsense get-out-of-debt plan is something that can work for the average Joe. While my husband and I were in Canada we paid off $70,000 worth of debt in two years on an $85,000/year salary using Dave Ramsey's method, which we had tailored to our own needs. We cut up most of our extraneous credit cards, we used cash money to buy things, we planned for expenditures in advance and we invested a good portion of our wealth.

Then we moved to America and everything changed.

My husband was offered a lucrative position at a big American company and we thought it was a dream come true. We figured the big move next door would be as simple as going on an extended vacation. But we were horribly mistaken. We've been here a year and the messes keep piling up. We're constantly having to file new paperwork for USCIS, the DHS, the IRS and whatever governing body happens to call on us for kicks. Our biggest problem thus far, however, has been that necessary evil called CREDIT HISTORY.

Being Dave Ramsey followers we figured credit history was unimportant. That credit cards
themselves were unimportant. We were woefully mistaken. Because we have no credit history in America, getting any kind of service has felt impossible. We had to put down $500.00 as a security deposit on our electricity service, $1, 000.00 as a fee for our cell phone service and $2700.00 down on our apartment rental, just as some examples. We still haven't gotten those fees back. We just bought a house and had to pay fees to the mortgage lender to check our Canadian history. We still couldn't get the best rate. If we had an American credit history it would never have been a concern.

Our one saving grace was a local credit union who offered us a credit card when we first moved here. The reason they gave it to us, they said, was because they had a good history with my husband's employer and they trusted that company's employees. So, thanks to the big American company, we got one little Visa card from a small local bank. There are no special features of this card. It's just a standard 18%, no annual fee Visa. But the fact that they report to the credit bureaus has given us a shot at being recognized as real people, with honest intentions to consume huge quantities of American merchandise, and then pay for it. We use our little Visa card whenever we can. We pay in full and then we use it again.

I still adhere to most of Dave Ramsey's basic principles - don't spend more than you earn, save for your future and give, give, give. But the cash cow that made him famous - the Stop-Using-Credit-Cards-Completely mantra he pushes - just doesn't work for the little guy. It's horribly unfortunate, but its true.

I still adhere to most of Dave Ramsey's basic principles - don't spend more than you earn, save for your future and give, give, give. But the cash cow that made him famous - the Stop-Using-Credit-Cards-Completely mantra he pushes - just doesn't work for the little guy. It's horribly unfortunate, but its true.

3 comments:

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JW said...

I think if you talked to Dave Ramsey himself you would probably find that he is not as strick about the baby steps as some those following them are. I know this to be a true fact because, I've had long conversations with a very close friend of his Mike Coe or Coe Financial Ministries. What most people don't realize is that his "Baby Steps" were meant to be used as only a guide not a law for people.

For instance, over the last six years I've heard him in debates with others on his radio show say to those that have called in and told him that they that became debt free following other methods say, "..I've never said that my way is the only way to become debt free. You should do whatever motivates you to do it with gazelle intensity ".

I would go as far as to say that Dave's plan doesn't work but, I would agree with you that it doesn't work for everyone in every circumstance. What I try to do is glean a little from everyone that I can that would make the most since for our situation.

emmaC said...

Sorry to hear about the rough move to America. I still think Dave is right in cutting up the cards and not using them. However it does help to have one card still open (cut up so unable to use) just to show up on report. That being said, you got ripped off with the cell phone. Instead of signing up for a plan, you should've gotten a prepaid (no contract) cell phone with no deposit--you just pay as you go. If you can cancel your plan, I'd totally do that instead. I'm also really surprised your current apt. manager was unwilling to just contact your old apt. manager for reference. Hope things get easier.