Women pay nearly £17,000 more to borrow money over a lifetime
According to Credit Karma, women have lower credit scores on average than men, and are more likely to fall into the ‘subprime’ category for lenders.
This can make accessing financial products such as personal loans, credit cards and mortgages more difficult or expensive. Credit Karma calculated the cost of the gender credit gap to be £16,913 across women’s lifetimes.
One of the biggest factors contributing to the gap is relationship dynamics. Nearly a third (31%) of women have some or all of their financial agreements in their partner’s name. This limits their credit exposure, and leaves them with little or no credit rating, should their relationship end.
The research shows that women are more averse to credit too. They are significantly less likely to enter agreements that have a positive impact on their credit rating, including personal loans, credit cards and mortgages, instead relying more heavily on unregulated forms of borrowing, such as buy-now, pay later schemes, which have no positive credit score impact.
Credit Karma also anticipates that the gulf will widen as a result of the pandemic, as 20% of women report that they have been laid off or furloughed, compared to 14% of men. Women are also more likely to have seen their income diminished over the past year.
Akansha Nath, head of partnerships at Credit Karma, said: “The last year has been incredibly challenging for everyone, but it’s concerning to see that women face being affected disproportionately in the long-term. There is no reason that borrowing should be more expensive for women than their partners, but there are a number of simple solutions that can make them more appealing to lenders.”
Credit Karma’s research found that financial disengagement is more prevalent among women than men, with 41% of women reporting that they don’t know their credit score compared to 35% of men.
Emma-Lou Montgomery, associate director at Fidelity International, said: “This is just another example of the many financial obstacles women face. From our own research as part of Fidelity’s Women and Money campaign we know that women are typically more cautious with their money than men and this is impacting their ability to save, invest and borrow. We also know that women already face a number of challenges when it comes to managing their finances from the gender pay and pensions gaps to the motherhood penalty.
“Having a low credit score impacts so much of our financial life and yet too few of us understand how our own behaviours play a part; negatively impacting how much we can borrow and even the interest rate we can borrow at. People with low scores tend to be penalised, yet something as simple as building up your own score by having a credit card in your name – rather than just as an additional cardholder on your partner or spouse’s account – can make all the difference.”
How to improve your credit score
* Make sure you have some bills or sources of credit such as a mobile phone contract or credit card in your name (not your partner’s or your parents’ names).
* Check your credit score and report regularly. Ensure that you recognise all searches and all financial products tied to your name so that you can tell if there’s anything fraudulent.
* Pay your bills on time. Missing a payment can significantly impact your credit score.
* Get on the electoral roll as this provides proof of address and that you have stable living arrangements.
* While it’s good to keep your credit balances low, make sure you use some credit every month. Paying bills off in full, on time, shows that you are good at managing your money.