A mom from Mississippi called into “The Ramsey Show” with a simple question: What kind of credit card should her 17-year-old son get to start building credit? The response she got from hosts Jade Warshaw and Ken Coleman flipped her expectations upside down.
“My credit score is 830 and my husband’s is like 780,” Jennifer said. “We want to start [our son] off on the right track of having a good credit much like we do.”
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A Different Philosophy On Credit
Warshaw welcomed Jennifer to the show as a new listener and explained why Ramsey personalities don't support building a credit score in the first place. “You have to have debt. You have to interact with debt in order to have a credit score,” she said. “When you borrow money, the borrower is slave to the lender.”
She continued, “Nobody’s asking questions about can you actually afford the item. How are you managing the cash that is actually yours? That's why I have an issue with the credit score.”
Jennifer shared that her son is a strong saver, already working part-time and stashing away money into a certificate of deposit. Her main concern was whether he'd be able to rent an apartment or get a car without any credit history.
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Warshaw reassured her: “You’re right, a lot of apartments do look at your credit history. But a lot of them don’t.” For the ones that do check credit, Warshaw said applicants can explain they have a zero credit score because they don’t use debt, then provide documentation like bank statements and pay stubs. In many cases, landlords may just require first and last month’s rent upfront.
As for cars, she added, “I’d rather him buy a car in cash and not have payments. The car payment is what keeps middle class middle class. Most people are walking around here with a $700 a month car payment.”
You Can Buy A House Without Credit
Jennifer then raised another concern: “[After college] he’ll probably want to buy a house. And I know it’s a lot harder to obtain a house with no credit score.”
“What if I told you that’s not true?” Warshaw replied. She explained the process of manual underwriting, which allows people with zero credit scores to buy homes based on financial behavior instead of borrowing history.
“You can buy a house with a zero credit score. It’s called manual underwriting,” she said. “They look for 12 months of trade lines. That could be your cell phone bill, your utilities… 12 months of rental history… and they’ll ask for your pay stubs.”
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Warshaw added that she personally bought her own home through this method. “A zero credit score is not the same as a bad credit score. A zero credit score is just as good as a high credit score. It simply means I don't borrow money.”
She called credit scores a “product” that benefits the lending industry. “There’s a lot of people making money off of that. That’s why you don’t see on TV people advertising zero credit scores, because nobody’s making money off that.”
Jennifer admitted it felt like a scary shift in perspective, but Warshaw encouraged her to take a closer look. “That fear is natural, Jennifer, but it’s because you’ve never heard what she just laid out. Most people never have,” Coleman added. “Go do your homework on it. Fact-check us. I think you’ll like what you see.”
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