Tag Archives: i love debt

The “I Love Debt” Score

Ah, the credit score. This week I’ve encountered a few people chasing after this shiny object. One was a recently single mom and also recently bankrupted. Fresh from that experience, she was after a credit card or personal loan in order to “get started rebuilding her credit”. Wow. That first financial disaster didn’t register as a mistake? Back for more? I told her:

“Personally, I wouldn’t put to much emphasis around building credit. It’s useful if you want to borrow money, but the best way to financial independence is to manage income well, and to build a strong savings foundation. “

Plenty of teenagers seek credit cards too, because they’ve heard somewhere that it’s important to build your credit. Sorry to burst your bubble, guys, but… the credit score would be more appropriately called the “I Love Debt Score”. As Dave Ramsey said,

You don’t want to spend your life building your FICO [credit] score, because it’s just an “I love debt” score.

Credit is not a solid foundation; savings is. Businesses call it retained earnings. Generally, people seek to build credit for the purpose of borrowing money later, such as a home loan. Buying a home is a worthy goal, for sure. But instead of borrowing some so you can borrow more later, why not just save for your deposit? Seriously, there are home loan lenders out there who don’t need you to have an “I Love Debt Score”.

So– don’t bother with the credit score myth. Get yourself a proper financial foundation, one that doesn’t include debt.