I recently listened to a fascinating call on The Ramsey Show that perfectly illustrates the confusion many people face after achieving debt freedom. A caller named Marsha shared that after following Dave Ramsey’s Financial Peace University course, she and her husband had paid off their house and car—a remarkable achievement by any standard. But when they tried to get a store credit card, they discovered their credit score had plummeted.
Their banker’s solution? Open new credit cards and start using them to “build credit.” This advice represents everything that’s wrong with our financial system today.
When Marsha asked if they should go back into debt to buy a secondhand car, Dave’s response was refreshingly direct: “Why would you go back in debt, honey? You worked so hard to get out. That’s silly. Pay cash for your car.”
The Banking Industry’s Debt Trap
What struck me most about this exchange was how quickly financial institutions try to pull debt-free people back into the system. The banker suggested Marsha open a secured credit card (where you deposit money to back up the credit line) and start using it regularly. As Dave bluntly put it, “Of course he wants you to start using your credit card. He’s a banker.”
This isn’t surprising when you understand the banking business model. Banks make money when you’re in debt. A debt-free customer is a non-profitable customer to them.
Stop listening to that banker. He’s not credible… His job is to get you into debt. He’s aghast that you broke free from him.
I believe this highlights a fundamental misunderstanding many people have about credit scores. A credit score isn’t a measure of financial health—it’s a measure of how profitable you are to lenders. When you’re completely debt-free, your score can indeed drop to zero, and that’s actually a good thing!
The Zero Credit Score Misconception
Many people panic when their credit score drops after becoming debt-free, but this is actually the expected outcome. As Dave explained, if you’ve truly closed all accounts and paid everything off, your score should eventually roll to zero.
There are a few important technical points to understand about reaching a zero credit score:
- 100% of items on your credit report must be closed with zero balances
- Old collections or forgotten accounts can keep your score active
- You may need to contact credit bureaus directly to report closed accounts
- Credit monitoring services like Credit Karma may not show accurate information
Dave’s co-host shared his own experience with credit monitoring sites continuing to show a score even after becoming debt-free. These sites often have a vested interest in keeping you concerned about your credit score so they can market credit products to you.
Protecting Your Debt-Free Status
Once you’ve achieved debt freedom, I strongly recommend freezing your credit reports with all three major bureaus. This serves two important purposes:
- It prevents you from impulsively opening new credit accounts
- It protects you from identity theft and fraud
As Dave mentioned, he froze his credit reports as soon as the service became available, and even froze his children’s reports when they were minors. This simple step provides significant protection against fraud since most lenders won’t issue credit to someone with a frozen report.
When you’re debt-free, you’re no longer regularly monitoring your credit, making this protection even more valuable.
The True Financial Freedom Path
I find it telling that Marsha’s initial concern was whether “paying off the house didn’t work” because her credit score dropped. This reveals how deeply the credit score myth has penetrated our financial thinking.
The truth is that paying off her house worked perfectly. She achieved exactly what Financial Peace University teaches—complete debt freedom. The problem wasn’t with her financial situation but with her perception that a credit score matters when you’re debt-free.
If you’re not planning to borrow money, you don’t need a credit score. Period. Pay cash for purchases or don’t buy them until you can. This simple principle will transform your financial life more than chasing an arbitrary three-digit number ever could.
The next time a banker or financial “expert” tries to convince you that you need debt to function in society, remember Marsha’s call. You’ve worked too hard to achieve debt freedom to voluntarily walk back into the trap that took so much effort to escape.
Frequently Asked Questions
Q: Won’t having no credit score make it impossible to rent an apartment or get certain jobs?
While some landlords and employers do check credit, many will accept alternative proof of financial responsibility such as bank statements, payment history for utilities, or references. Being debt-free with savings is actually a stronger financial position than having a high credit score with debt.
Q: Should I keep one credit card open just for emergencies?
Dave Ramsey consistently advises against this approach. A better alternative is building an emergency fund of 3-6 months of expenses. This provides real security without the risk of accumulating debt during difficult times.
Q: How can I buy a house without a credit score?
It’s possible to get a mortgage without a credit score through a process called manual underwriting. This involves providing documentation of your payment history for rent, utilities, and other regular expenses. Some lenders specialize in this type of mortgage approval process.
Q: Is it worth keeping credit cards open just to maintain travel rewards and benefits?
The statistics show that people spend 12-18% more when using credit cards versus cash. Any rewards you earn (typically 1-5%) are far outweighed by this increased spending. Additionally, maintaining credit cards keeps you vulnerable to impulse purchases and debt accumulation.
