TEXT OF INTERVIEW

TESS VIGELAND:I'm going to say a name right now and then sit back and wait for the swoon. Ready? Dave Ramsey.

I mean, what other radio host would let you go on air and yell at the top of your lungs that you are debt-free? Rush? Probably not. Suze? Nah. Me? I'll think about it.

Meanwhile, we invited Dave to join us, because a. Lots of you listen to him and us, and b. credit and debt are his passion and we wanted to get his perspective on the mess we all find ourselves in.

Dave Ramsey of the Total Money Makeover and the Dave Ramsey Show welcome to the Marketplace Money show.

Dave Ramsey: Well, I'm honored to be with you Tess. Thanks for having me.

Vigeland: Now I want to start with a news item from last week, because it's right up your alley. And this is the credit card reform bill. Now this has been hailed as really big step in personal finance, reining in some of the industries most egregious practices. But based on what I've read in your book and heard you say on the air, this is no giant leap for all of us.

Ramsey: Well, I reined them in years ago. I used a pair of scissors. If you chop up these things, you don't have a problem with these people. I'm sorry. It's great that universal default is gone, it's great that we're trying to get companies that misbehave to behave, but you know, there's the other side of the coin and that's the consumer has to take responsibility. If a company's not a blessing to you, quit doing business with them.

Vigeland: Yeah, you know I think I read that you haven't used a credit card in, what, 20 years or so?

Ramsey: Thereabouts.

Vigeland: What's that like? Because I don't know.

Ramsey: Well, I use a debit card. I can do anything that you can do, I just can't go in debt.

Vigeland: -You know, your big message to all of us, is that the only real way to have stability and to build wealth, is to get rid of debt. Although, you do make an exception for mortgages. Now a lot of us in personal finance talk about, say the differences between good debt and bad debt. Credit cards, bad. Student loans, good.

You want us all, the entire nation, to never use debt, that none of it is good. Why is there no such thing as good debt?

Ramsey: Well, it's really simple. I've looked at people who've built wealth. By and large, they stay away from debt. They don't discuss good debt. Only financial planners discuss good debt. And as a matter of fact, when the Forbes 400, the wealthiest 400 people in America, were surveyed, 75 percent of them said the best way to build wealth is get out of debt and stay out of debt.

Vigeland: I want to ask you about your views on credit scores. I think you've called the FICO score an "I love debt" score, is that right?

Ramsey: Mathematically, that would be accurate.

Vigeland: We talk on this show -- and we're certainly not alone -- about the necessity of a credit score, so you can get a mortgage and insurance companies use the score, employers pull credit reports. How do you function in this particular banking society, without one?

Ramsey: The FICO people tell us that 35 percent of the accumulation of your FICO score is based on your debt history, 30 percent is based on your level of debt, 15 percent is based on the length of time you've been in debt, 10 percent is based on new debt and 10 percent is based on types of debt. I can hand you $10 million cash and it will not change your FICO score one penny. It's not an "I'm winning at life" score, it's an "I've been kissing the bank's butt on a regular basis" score.

Vigeland: As an average consumer, who is not a multi-millionaire, when you promote this notion that you shouldn't worry about your FICO score, isn't that really hard for a lot of other people who can't otherwise function?

Ramsey: Well, I certainly didn't start out a multi-millionaire. It's pretty easy to function without one, honestly. It's just that you're not running around trying to borrow money all the time. Now, if you're going to borrow money all the time, then you need to worship at the altar of the great FICO. But if you're not worried about borrowing money all the time, then the FICO score is really not a big deal.

Vigeland: Let's talk about your debt snowball. This is part of your "Get out of debt" program and you encourage people to pay off the smallest debts first and go from there. Whereas, on other personal finance shows, this one included, we talk about paying down the debt with the highest interest rate first. What makes your plan better?

Ramsey: Well, to start with, anyone who gets somebody out of debt, I'm in agreement with. The thing that we discovered is this: Personal finance is about 80 percent behavior. Once we understand that my problem is the guy in my mirror, if I can control him, he can be skinny and rich, then I start to understand that "Gosh, personal finance is about relationships." Now when we take that as an answer to the question, then we would say, "Gosh, if I pay off the smallest debt, I feel like I got traction."

It's kind of like going on a diet and losing weight the first week. If you go on a diet and you don't lose weight for three months, you quit going to the Y. I mean, bagels here we come, you know? But if I pay off two or three little debts, I get excited. And by the time they get to their largest debts, they've got so much emotional momentum that they can plow right through a $15,000 or a $20,000 student loan or a $15,000 or $20,000 car debt, and not even look back. Is it mathematically correct? The weird thing is, Tess, we've done case studies on this, it's only about one or two months difference. The difference is, people keep doing it.

Vigeland: Your books are really full and your airwaves, of all kinds of success stories. Is anyone ever right in, having tried the system and it just didn't work, despite what they really think was really true commitment?

Ramsey: No. I'm not saying they're not out there, but I just don't get that letter. I guess they think, I would probably challenge them on their commitment, because I would. Now are there times that someone calls me and they agree and I agree, because of something going on in their life right now, we're going to push pause on that? You know, it works when people are able to work it.

But not everybody's able to work it at this moment in time in their lives. A guy called me today on my show and he just got laid off. And he said, "What do I do about paying off my debt?" You don't right now. You eat. You take the severance package and you set it aside as a huge emergency fund, because dude, you are square in the middle of an emergency. But now when you get back to work, that severance package becomes a signing bonus and let's accelerate your total money makeover then.

Vigeland: Dave Ramsey is author of "The Total Money Makeover" and also the host of the Dave Ramsey show. Thank you so much, it's been a pleasure talking with you.

Ramsey: Tess it was an honor to be with you.