Women pay back nearly £17,000 more for their borrowing than men over a lifetime
The credit reference agency, Credit Karma, has discovered that the gender credit gap between women and men stands at £16,913 over their lifetimes.
To contextualise somewhat, that’s enough money to use as a deposit on a mortgage! You could buy a new car, or even a Rolex or two with it.
According to the research Credit Karma has done, a combination of fear of credit and a reliance on partners taking the financial lead are what’s making it more expensive for women to borrow money.
Credit scores that ‘need work’
The research that Credit Karma has carried out has found that, at the moment, women are more likely to fall into the “subprime” category of borrowers; meaning that, in general, creditors will view them as higher risk to lend to than men.
Being viewed as “subprime” makes it much more difficult to access financial products like loans, credit cards and mortgages – and it makes it more expensive to access these products, too.
13% of women have a credit score under 500
Furthermore, the research has found that the average credit score for men is 705, compared to an average of only 652 for women.
In addition, 13% of women have a score below 500, compared to only 6% of men.
You can find out more about credit scores, what they mean & how to improve them here.
Why might women’s credit scores be lower?
The answer to this question isn’t definitive, but, Credit Karma’s research suggests that one of the biggest reasons behind the gender credit gap could be relationships; nearly a third of women (31%) have some or all of their credit in their partner’s name.
The reason that this has a negative impact on a credit score is that it limits a person’s ‘credit exposure’, and should the relationship end, it would leave that person with little or no credit history and credit rating.
The above details aren’t the whole picture. Credit Karma’s research indicates that women also seem to be more averse to taking out credit than men; with just 70% of women taking out credit cards, compared to 76% of men. Yet, opening a new credit card account can add to your credit utilization rate. If you keep your utilization active and under 25% month-to-month, then this number should positively affect your credit rating.
There’s also a similarly sized gap with mortgages.
Why do credit scores matter?
Regardless of whether or not you use (or indeed need) a loan or a credit card, your situation could change in the future, so, improving your credit score whilst you don’t need credit, can put you in a strong position should things change and leave you needing to take out credit in years to come.
Lots of creditors (lenders) don’t lend to people who have low credit scores – regardless of whether this is due to ‘no credit’ or ‘low credit’ – as they view them as less likely to be able to pay on time. If you’re in this situation and you do manage to secure credit (in the form of either a loan or a credit card), then you could be exposed to additional fees and interest.
Actions that you’ve taken – or haven’t taken – in the past can affect your credit score negatively. But, equally, small changes that you make from now on can make a big difference to your credit score in the future.
3 simple steps to improve your credit score
- Get a mobile phone contract or credit card in your name, not your partner’s. Lenders can’t assess your creditworthiness if you’ve never had any credit.
- Pay your bills on time. If you miss even one payment it can have a significant negative impact on your credit rating – even if you only miss the payment by a couple of days. Paying your bills both on time and in full is really important for your credit rating as it shows you’re good at repaying money you owe.
- Get on the electoral roll. This provides creditors with proof that you live at the address you give them and that you have stable living arrangements.
According to Credit Karma, by taking note of the information and steps outlined above, women can become more engaged with their own finances, less fearful of the unknown and less reliant on their male partners and family members – and in doing so, they can improve their credit ratings and take control of their own financial futures.
If you’re struggling with debts, we could help. Simply click the button below to book a call back from one of our friendly advisors and we’ll run through your situation and advise you on the best debt solutions that are available to you.
*The information in this article is based on a Qualtrics Research piece – interviewing 1,012 adults in the UK, between 16.02.20221 & 05.03.2021, commissioned by Credit Karma.