Total Money Makeover Question

I have read the book and love his advice. I can't remember exactly what he says about this but I believe it is to close any store credit cards and only keep 1-2 to use for emergencies.

I'm not out of debt yet, but I love the program. We were well on our way to paying off all of our debts when the recession hit us hard...really hard. If it weren't for the plan I think we would not have made it as far as we have. Anyway, in my opinion, if Dave says to get rid of the cards, then get rid of the cards. We got rid of ours, and it has not been hard to live without them. As for your FICO score, if you're out of debt and pay cash for everything except a house, then why do you need a FICO score? And if you buy a house, with 20% down on a 15 year with a manual underwriter you'll still be able to buy one. My advice would be to stick the baby-steps. They're there for a reason and they work. Remember, Dave says there's always one in the couple who fights the plan, but once s/he sees it working, s/he comes around and see the light.

A.

I don't know about the Total Money Makeover as I just heard about Dave Ramsey within the past few months.

I do know that closing your credit card accounts will have a huge negative impact on your FICO score. A large part of your FICO score is based upon the ratio of how much credit you have available and how much you use. Rather than close them, maybe you would want to consider only closing one and write a letter to the others asking them to decrease your credit limit.

First, I'm not a Dave Ramsey fan, not that I don't like him, I just haven't read his books/heard his show. I understand the point of eliminating your access to credit so you can't be tempted to overspend, and I'm all in favor of paying cash for everything, but I tend to agree with your husband about being concerned over the impact to your FICO score. Part of that score is the ratio of debt to available credit. Lots of people besides creditors check credit scores these days, including potential employers, potential landlords, etc. I would just be hesitant to do something I knew was going to negatively impact my FICO score. Why can't you just pay off your debt without closing the accounts?

If you follow Dave Ramsey's advise to the letter, then your FICO score should never matter to you anymore. Remember that you now pay CASH FOR EVERYTHING so your credit score is a non-issue. Now that you have read the book, start listening to the radio show. You will get to hear people call in and ask quesitions, have real-life, real-time concerns, and the best part is hearing when people call in to say "We're Debt Free!!" So motivating!! I ♥ Dave Ramsey!

PS: You do not need FICO scores when paying cash for EVERYTHING including houses! Rent until you can buy with cash, saving EVERY PENNY you can!

I understand the worry about the FICO score. First of all, I moved to the US from Europe when we got married.not having a FICO score at all. We use a different credit system. Hubby was the cash guy. Now we needed a place to live. Oops, no credit score for me and none for hubby. We needed to have a lease. Requirement huge deposit. Of to the bank we went. We needed 1 credit card for the both of us. Let's check your FICO score.....oh, non existent...sorry declined. So how do we build credit, mr. bank.
They didn't know how to approve us. Store cards?, but we didn't want one of those. After 2 years the bank invented a system where we could put our own money down as a credit line out of our checking, they would hold on to it. So, we started with a $300 credit line and within 6 months we had great credit and here the offers came, but we never fell for them. In some case you might need a FICO score, but you don't need tons of cards and minimum payments.
Reduces everthing to 1 card, ask for the lowest credit line possible and pay off what you used that month. I only do 1 or 2 charges just for groceries or going out for lunch and pay them off, before the statement arrives. It keeps your FICO up and you are still debt free.

Hi, we're doing the baby steps too. If you can find any of Dave's cd's they are WAY better. He's so excited you can't help but feel the same way.
The point in going through the baby steps is be debt free. By the time your done you won't need a credit score. You will learn to save for everything you want. Dave hasn't had a credit score in a decade or so. If he's only worried about the credit score who cares you'll have cash. Who's going to say I'm sorry I can't take your cash because you don't have a credit score~LOL.
Boy brain will be on board way easier if he could hear Dave, it changes every thing, I think any way : >)
Happy Gazelling
K
Remember having the cards open and not using them hurts your score too. Then it's worse if they are closed by the card company than you. When you close them make sure you tell them you want it to say closed by cardholder. They only "help" your score if you are always using them. When you buy a house to many credit cards hurt you; but a huge amount of cash in the bank doesn't. How many bank statements do they ask for...3 or 4.
As far as an employer goes do they want someone w/ open credit or someone with the self-control & self-discipline to be debt free???
I would think once you say your debt free on the Dave baby steps that changes how people view your "bad or no" credit score.

I love Dave Ramsey, but I think you can tailor his system to make it work for you. He doesn't believe that the FICO score matters, but in reality, to get a loan for a home, etc., it does. We went through his Financial Peace University and have been successful in having zero debt (even bought a minivan with cash a year ago), but we still have a credit card that we use and pay off at the end of every month so that we pay no interest. It is the ONLY card we have now (closed all of the others), but we do use it and as long as we pay it off, I don't feel like it's causing us any problems. The bottom line is to get and STAY out of debt. If having the cards is too much temptation and you can't have them in your wallet without running them up, then get rid of them. If you can have some self control and only use them when you know you can pay it off at the end of the month, then I see no problem with them. Just know that Dave would totally disagree with me on this point! LOL!

We kept one or two cards open, but I have them stored in my jewelry box and NOT in my purse so that they cannot be used. That way closing all of them does not negatively affect our credit rating. I take them out every couple of years and use them, immediately pay them off, and back into the box they go, so the companies do not close them. Like you, I was just not ready to close them all until I feel confident that I can pay cash for everything.
P.S. Dave Ramsey's show is on the "Family" radio station...here and in the valley it's 106.7, if you can get it in Tucson I think you'd really enjoy listening to him.

Maybe I misread the whole thing, but we did have a discussion about this in our group class (over a year ago... so pardon me if I remember incorrectly). But I don't know that you have to actually close the accounts. Just cut up the cards so you can't use them! Once you are completely out of debt and have your proper savings in place, you won't need them or care. But, if it will lower your FICO drastically, then I would wait a while to close them. Just cut up the card. The whole point is to not USE them. Even if you have no interest or intent on using credit for anything, it can affect what you pay for things sometimes. Planning to ReFi your house anytime soon? That would be acceptable in Dave's world... but don't do anything to worsen your credit score because it will affect the interest rate you are able to get for your re-fi.

Moving? When you turn on the power at your new location, it may require a larger deposit if you have a lower credit rating. Things like that.

Just cut up the cards for now, and worry about closing them later on when you are more comfortable with the plan.

Congratulations on your "Gazelle Intensity"! Ok---so very quickly---you CUT UP all of the credit cards---and DON'T use them. DO you still owe any money on them? Close ALL your accts except your OLDEST one (if you have paid on time and have a good record with them.) THEN you close all the others and NEVER use the one that is open. But you MUST cut up all of your cards so you are not tempted to use them!

Good luck! I wish you and your hubby the best in this endeavor!!

We closed all of ours too but for one. It shouldn't do anything to your score.
If you not going to use them, close them. If you have them you are able to use them and that's not good.
We used CCCS and made monthly payments. Didn't hurt our credit a bit and was debt free in three years. Haven't owned a Credit Card since and that was about 12 years ago. We do use our MasterCard check card but have no payments it comes straight out of our checking account.
Wish you the best,
C.

We closed them all except for one and our debit/visa. It didn't do anything to our score. We are in the process of doing this. We aren't exactly gazelle intense but we're making quite a dent in our debt. I wish you the best. Happy New Year!