Most people know their credit score is important. It affects whether you get approved for loans, what interest rate you’ll pay, and even things like your car insurance and ability to rent an apartment.
But what if everything you thought you knew about it is… kind of backwards?
In a recent video titled The INSANE Math Behind Your Credit Score (Make It Make Sense), George Kamel from “The Dave Ramsey Show” breaks down how credit scores work and why the entire system is way more about debt than financial health.
What Your Credit Score Really Measures
Your credit score doesn’t measure how good you are with money.
Instead, it measures how good you are with debt.
“Everything used to calculate your score has to do with debt,” Kamel says.
“Basically, the only way to achieve and maintain a high credit score is to go into debt, stay in debt, and continually pay your debt accounts perfectly without adding too much or paying too much off too soon.”
Here’s the basic breakdown of a FICO score and how it is calculated:
35% Payment history: Have you made on-time payments?
30% Amount owed: How much of your credit limit are you using?
15% Length of credit history: How long have you been borrowing?
10% New credit: How often are you applying for new debt?
10% Credit mix: What types of debt do you have (credit cards, car loans, student loans, etc.)?
None of this takes into account your savings, income, or net worth. You could inherit $1 million, and your credit score wouldn’t change, but paying off a car loan early might drop your score.
The Credit Score Trap
Kamel points out that the system rewards people for keeping debt around.
Pay off your loans early? Your score might drop. Close a credit card? That could hurt your score, too.
“A high credit score means you’re crushing it with debt management, not money management,” he explains.
He also calls out the bizarre logic of chasing a better score: “Why do we want a credit score? To access more debt. Why do we want to go into debt? To buy things we can’t afford.”
The “Best” Credit Score? None At All
This is where things get really unconventional. Kamel says the best credit score might be… no score at all.
“The best credit score is no score at all,” he claims. And no, he’s not joking.
If you pay off all your debts and close your credit accounts, your score will eventually disappear.
That’s not a bad thing, according to Kamel. In fact, he says it helped him build wealth faster because he was no longer using his income to manage debt.
In his words: “When you decide to pay off all of your consumer debt and cut up your credit cards, you will take back control of your greatest wealth-building tool: your income.”
And while not having a credit score sounds like a barrier to major life steps like buying a home or renting a place, Kamel says it’s doable.
“You can do all of these things without a credit score, and I’ve got the videos and receipts to prove it,” he says.
Why Chasing a High Score Might Be Holding You Back
Chasing a perfect credit score may result in staying stuck in debt.
Instead, paying off debt completely and living without a score can offer more financial freedom.
As Kamel puts it, “If your credit score is higher than your bank balance, you’re headed in the wrong direction.”
The system may be flawed, but you don’t have to play along. There’s another way, one that puts your money, not your debt, front and center.