Paying Off My House "Didn't Work"

Summary

Summary of "Paying Off My House 'Didn't Work'" Episode of The Ramsey Show Highlights

Release Date: March 27, 2025

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Introduction

In the episode titled "Paying Off My House 'Didn't Work'," the Ramsey Network delves into the challenges faced by individuals striving to eliminate debt using Dave Ramsey's financial principles. The discussion emphasizes the importance of staying debt-free and navigating obstacles that arise even after successfully paying off major debts like a mortgage.

Caller’s Financial Achievement and New Challenges

A caller shares their journey of following Ramsey's university course, proudly stating, "We paid off our house, we paid off our car" (00:06). Despite these significant achievements, they encountered an unexpected issue: a drastically low credit score after applying for a charge card on a TV shopping platform. The caller explains that their lack of credit cards and revolving credit led their bank to perceive them as having a zero credit score, complicating their intention to purchase a secondhand car (00:06).

Dave Ramsey’s Response and Guidance

Dave Ramsey responds firmly to the caller's predicament, asserting, "It did work. You paid off your house. The goal was to get out of debt" (00:45). He questions the rationale behind returning to debt, emphasizing the hard-earned stability achieved by eliminating existing debts. Ramsey advises against taking on new debt, especially for purchasing a car, and suggests alternative solutions such as paying cash or reconsidering the purchase altogether (00:58; 01:12).

Sam’s Insights on Credit Scores

Sam joins the conversation to shed light on credit score intricacies. He explains that completely paying off all debts should ideally result in a zero credit score, but discrepancies can occur if any accounts remain open or unresolved. Sam mentions, "If you paid some... your score will roll to zero" (01:22), highlighting the importance of ensuring all credit accounts are closed to reflect a true debt-free status.

Deep Dive into Credit Bureau Reporting

Further elaborating on credit scores, Dave Ramsey underscores that for a credit score to drop to zero, every account must be closed with a zero balance. He warns that any lingering negative marks, such as old collections, can prevent the score from reaching zero, potentially keeping it in the lower ranges like the 500s (03:00). Ramsey advises individuals to meticulously review their credit reports, resolve any outstanding issues, and possibly directly communicate with credit bureaus to confirm the closure of all accounts (03:12; 03:42).

Fraud Prevention Measures

The conversation shifts to the importance of safeguarding one's credit information. Both Ramsey and Sam advocate for freezing credit reports as a preventive measure against identity theft. Ramsey notes, "Freeze it just to make sure nobody's fraudulently opening anything in your name" (04:48), while Sam adds that freezing credit has been effective in preventing fraudulent activities in their personal experience (05:06).

Final Advice on Budgeting and Debt Management

Concluding the episode, Dave Ramsey reinforces the principles taught in Financial Peace University. He emphasizes the rule of paying cash for purchases to avoid debt and cautions against soliciting credit from banks that profit from debt accumulation. Ramsey encourages listeners to maintain their debt-free status by adhering to these fundamental financial strategies, ensuring long-term financial health and freedom (05:26).

Key Takeaways

• Stay Debt-Free: Successfully paying off significant debts is commendable, but it's crucial to avoid falling back into debt.

• Manage Credit Responsibly: Ensure all credit accounts are closed with zero balances to reflect an accurate credit score.

• Protect Against Fraud: Freezing credit reports is an effective strategy to prevent identity theft and unauthorized credit activities.

• Budgeting is Essential: Consistent budgeting and disciplined financial practices are vital for maintaining financial stability and achieving long-term goals.

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This episode serves as a valuable resource for individuals seeking to maintain a debt-free lifestyle, offering practical advice and emphasizing the importance of vigilance in financial management.

Transcript

[Dave Ramsey]

Brought to you by the EveryDollar app. Start budgeting for free. Today.

[Caller]

We followed your university course and we paid off our house, we paid off our car. And I went to get a silly charge card on TV shopping cart. And we found out our credit zero was. Our credit score was really, really low. And we contacted our bank and they said because we don't have credit cards, any revolving credit. So it didn't work. Paying off the house. Now what do we do? We want to purchase a secondhand car.

[Dave Ramsey]

I'm sorry. You. You. It did work. You paid off your house. The goal was to get out of debt. Get into debt.

[Caller]

Correct.

[Dave Ramsey]

So your bank. Your bank's trying to get you back in debt. Why would you go back in debt?

[Caller]

Well, we don't have. We don't want to put all. All cash on a car right now.

[Dave Ramsey]

Why would you go back in debt? You work so hard to get out. That's silly. Pay cash for your car.

[Caller]

Take it out of our. Our retirement.

[Dave Ramsey]

Yeah. Or don't buy the car.

[Caller]

Okay.

[Dave Ramsey]

Stop borrowing money.

[Caller]

Yeah. We have no credit cards. We have no good. No payment.

[Sam]

But if you paid some. If you paid everything off and you're truly not borrowing any money, your score will roll to zero. If it doesn't, something's open somewhere. And so if.

[Dave Ramsey]

But it did work. It worked because you got out of debt and you're staying out of debt until you talk to your idiot banker who tried to talk you into going back into debt.

[Caller]

He self credit card. We have to put the money in and back it up. And he wants us to start using that.

[Sam]

Yeah.

[Dave Ramsey]

Yeah, he wants to start using a credit card. He's a freaking banker.

[Sam]

Yeah.

[Dave Ramsey]

Stay away from those people. Honey. Get out of debt. Stay out of debt. Don't go over there with the snake handlers and expect to get anything but bit by a snake. No, Stop that. Don't listen to that banker. He's not credible. He's an idiot. He's a banker for God's sake. His job is to get you into debt. He's aghast that you broke free from him. No. Pay cash for whatever you're doing. Honey, no. Don't go. Open up another credit card to build your credit. You don't need credit if you're not going to borrow money. And you're not going to borrow money. Marsha, stop it. Pay cash for the car or don't buy the car. One of the two. Period. That simple. That's the rule. That's what you learned in Financial Peace University. So it worked. It did work. It worked perfectly. It worked as designed. You got to exactly where you were trying to get to. Only then somebody that sells debt for a living didn't like it. Oh, shock.

[Sam]

You want to know what happened on the same line? You have to be careful too, because once Sam and I paid off all of our debt, I'm sitting there waiting for my credit score to roll to zero. Right. Because that's exciting.

[Dave Ramsey]

If you don't have everything close, closed, it won't.

[Sam]

Well, I kept looking at my credit score, but I was going to one of those, you know, free credit score, you know, credit karma, one of those things to check it. And I'm like, man, it's been six months. Why isn't my score gone to zero?

[Dave Ramsey]

Do you had an update?

[Sam]

They no. And they kept offering me, you want to get your, your score up, get this card you want to get. And so I found out that those sites they're trying to market to you. And so when I went to the official site, it had rolled to zero.

[Dave Ramsey]

That's what I meant. And so I hadn't updated it to the karma.

[Sam]

Yeah. And they don't want to update it because they want me to think that.

[Dave Ramsey]

I have to you that you need their service. Yeah. One thing we do need to clarify though, for those of you out there, that just the technicality here, 100% of the things showing up on your credit bureau report have to be closed and a zero balance. Otherwise you're not going, you're just going to lower your credit score. You're not going to roll it to a zero. And so if you have an old outstanding collections on there that has not been solved or paid or something else from 25 years ago, I don't care if it's on there, you still have an open item. You might drop down into the 500s and not go to zero because you're still. You got one thing on there and it's bad, you know, so you not only have to pay off everything, you have to close everything. And you may even have to go to the credit bureau reporting agency and report to them that all of these things are closed. And then you will see that action. But.

[Sam]

And then you should freeze it at that point because that's just a safety measure on your part.

[Dave Ramsey]

Mine has been frozen since they offered that service.

[Sam]

That's right.

[Dave Ramsey]

The day it had. The day they offered it, we froze everything. As a matter of fact, we fro. All of our children were minors and we froze all theirs. And they've never been now they're in their 30s.

[Sam]

Yeah. And the reason they've never been unfrozen fraud. And if you are our operating in this life where you don't have debt, you're not monitoring that, you're not checking that. And so it's good to freeze it just to make sure nobody's fraudulently, fraudulently opening anything in your name.

[Dave Ramsey]

It'll, it'll keep a lot, not all types, but it'll keep a lot of types of fraud off if they happen to check.

[Sam]

That's right. That's right.

[Dave Ramsey]

They find it frozen. They won't issue the card to an identity thief. That's, that's what you're looking for there. Create your free every dollar budget today. The simplest way to budget for your life.