Dave Ramsey

Dear Dave,

I’ve noticed that lately there are a lot of loan modification companies opening in my area. I’ve been getting lots of information in the mail, too.

What are your thoughts on these companies?

- Lonnie

Dear Lonnie,

There are some legitimate people out there who have a good track record and know what they’re doing in the loan modification and short sale processes. My gut feeling, though, is that 70 to 80 percent of them are brand new to the field. They probably bought a business in a box. They think a lot of folks are in trouble, so they’re going to “help” them. The problem is that a lot of these same people couldn’t even spell “loan modification” a week ago!

If I were going to consider getting involved in this process, I’d do a whole lot of investigating into the history of the people. I’d want to know how long they’d been in the business, how many “modifications” they’d done, and how much experience – and real clout – they have with the banking industry and the mortgage and real estate industries.

Here’s a tip: if you hear phrases like “everyone’s doing it these days” or “I started doing this a few months ago,” you need to get away from them as fast as you can!

- Dave

Dear Dave,

We’ve paid off most of our credit cards. My wife doesn’t want to pay all of them off, though. She says it’s a good idea to have open cards and a high score on your credit report to show that you’re creditworthy. I want them out of our lives completely. What do you think?

- Wayne

Dear Wayne,

I think it depends a lot on the goal you have in mind. If your goal is to stay in debt for a really long time, then by all means keep a credit card open. If your goal is to get out of debt and stay out of debt, then what does it matter if your credit score goes down? My FICO score is zero, and I could probably buy the FICO company for cash!

A credit score is really nothing more than an “I Love Debt” score. It isn’t based on how “worthy” you are, how much you have, or how much you make. It’s based on the fact that you got into debt, stayed there for a long time, and paid creditors a lot of unnecessary money. I stopped borrowing and paying back debt 20 years ago. As a result, my credit score gradually deteriorated to the point where it doesn’t even exist anymore.

FICO will love you if you’re always in debt and making payments, but you’ll never be able to take care of your family, retire with dignity, or make a difference in the world through giving.

Close the accounts, Wayne. Cut up the cards and pay cash for everything! You can’t worship at the altar of the great FICO if you want to get out of debt, and stay out of debt!

- Dave

Dave Ramsey

Dave Ramsey is a personal money management expert, popular national radio personality and the author of three New York Times bestsellers.
TOWNHALL DAILY: Be the first to read Dave Ramsey column. Sign up today and receive Dave Ramsey and Townhall.com's daily lineup delivered each morning to your inbox.

Get the best of Townhall Finance Daily delivered straight to your inbox

Follow Townhall Finance!