Picking up Nickels

Monday, March 05, 2007

Hey Dave Ramsey: Zero debt = zero credit history

A sad article in the New Bedford Standard Times yesterday reminded me of the Dave Ramsey zealot that I wrote about a few months ago.

The Standard Times article (link) tells the sad tale of Douglas Boice, a man who is about to lose his home due to physical disability and mounting medical bills:

"When my wife was sick (liver and heart disease), I took care of her, and all my money went to care for her, and then when she died, I took all our money and paid off the mortgage on the house," Mr. Boice, 62, said. "I've been to every bank in town and been turned down. Everything I have tried to do, I ran into a wall."

A fateful decision in 1980 stymies him two decades later.

"We joined Amway (a network marketing company that some allege is actually a lifestyle cult) and we adopted their cash-only method," he said. "We never used credit to buy anything. If we didn't have the cash, we didn't buy it."

The problem he faces now in seeking financing to pay his debts to remove the liens and fix his house is that he has no credit history, Mr. Boice said.

"The banks told me if I had bad credit, I'd be better off than having no credit," he said.


I realize that Mr. Boice doesn't claim to be a Dave Ramsey disciple in this piece, but his plight is a perfect example of the dangers of the All debt is bad! mantra that Ramsey preaches. When Mr. Boice paid off his mortgage and lived a cash-only lifestyle, he was essentially "off the grid" as far as lenders are concerned. While he did gain "financial freedom" for a time, that changed quickly when his wife's medical bills piled up and he was no longer able to work after suffering an aortic aneurysm.

Dave Ramsey states on his web site that "There is NO positive side to credit card use.". Wouldn't the credit history that responsible credit card use provides be a positive thing when it keeps a 62 year old widower from losing his home? Perhaps using a credit card for small purchases on a monthly basis (and paying the balance in full each month) isn't such a bad thing after all...

8 Comments:

  • That is a sad story, but you don't need credit to survive that situation all you need is life insurance. That is exactly what it is for and anyone who has people dependent on their income should have insurance in place to protect the ones they love.

    By Anonymous B Schwartz, at 3/5/07, 11:24 PM  

  • The article implies that the Mr. Boice's inability to work along with his wife's large medical bills pushed them over the edge. It may have been perfectly reasonable for his wife to not have life insurance if she wasn't earning income or providing child care.

    In retrospect, there are lots of things that could have helped his situation: Better health insurance coverage, LTD insurance for Mr. Boice, larger cash reserves, or the ability to get a home equity loan or reverse mortgage.

    If all else fails, I know that I could always tap the equity in my real estate due to my established credit history and strong credit score. Unfortunately, Mr. Boice forfeited that option.

    By Blogger Frugal Frugalson, at 3/6/07, 8:26 AM  

  • Frugal, thats a good find. It has many lessons in it...a lesson about wise use of credit being one of them.

    I am *planning* to mention this article (with credit to you) on my blog. :) Let's see if that works out.

    By Anonymous golbguru, at 3/8/07, 1:04 AM  

  • Thanks golbguru, I could use the traffic. ;)

    By Blogger Frugal Frugalson, at 3/8/07, 7:45 AM  

  • Frugal, I have posted the article. Feel free to speak you mind on any comments that it may receive.

    Thanks for the lead.

    By Anonymous Golbguru, at 3/9/07, 3:18 PM  

  • It was so sad... People should use credit cards. It is really important, cause it's probably the main part of our financial life.
    But I think that credit companies should have special credit programs for such especial cases.

    By Anonymous CreditEgghead, at 8/1/07, 6:34 AM  

  • There is nothing bad in using a credit card but it should be done with sense. You should be responsible for what you are doing and be sure that you will be able to pay on time.

    By Anonymous CreditUser, at 8/27/07, 3:52 AM  

  • While I feel for this family, I have learned to live the cash only life style that Dave Ramsey preaches. Being debt free is an UNBELIEVABLE feeling. My credit score has gone up. Even without credit cards, other companies report to your credit regularly such as the gas, electric, phone, and cable companies.

    By Anonymous Anonymous, at 4/29/11, 4:31 AM  

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