Women pay almost £ 17,000 more to borrow money over their lifetimes
Financial inequality means women face higher costs to borrow money throughout their lives, according to a Credit Karma study.
According to Credit Karma, women on average have lower credit scores than men and are more likely to fall into the âsubprimeâ category for lenders.
This can make accessing financial products such as personal loans, credit cards, and mortgages more difficult or more expensive. Credit Karma calculated the cost of the gender credit gap to be Â£ 16,913 over the lifetime of women.
One of the main factors contributing to the gap is the dynamics of relationships. Almost a third (31%) of women have some or all of their financial arrangements on behalf of their partner. This limits their credit exposure and leaves them with little or no credit rating if their relationship ends.
Research shows that women are also more averse to credit. They are significantly less likely to enter into deals that positively impact their credit rating, including personal loans, credit cards and mortgages, instead relying more on unregulated forms of borrowing, such as buy-now, pay-back programs that have no positive impact on credit score.
Credit Karma also predicts the chasm will widen as a result of the pandemic, as 20% of women report being fired or put on leave, compared to 14% of men. Women are also more likely to have seen their income decline in the past year.
Akansha Nath, Head of Partnerships at Credit Karma, said: âThe past year has been incredibly difficult for everyone, but it is worrying that women are disproportionately affected in the long term. There is no reason why borrowing should be more expensive for women than it is for their partners, but there are a number of simple solutions that can make it more attractive to lenders.
Credit Karma research found that financial disengagement is more common among women than men, with 41% of women saying they don’t know their credit rating, compared to 35% of men.
Emma-Lou Montgomery, Associate Director of Fidelity International, said: âThis is just another example of the many financial barriers women face. From our own research for Fidelity’s Women and Money campaign, we know that women are generally more careful with their money than men, which impacts 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 pension gap to the maternity penalty.
âHaving a low credit score has a huge impact on our financial life and yet too few of us understand how our own behaviors play a role; negatively impacting the amount we can borrow and even the interest rate at which we can borrow. People with low scores tend to get penalized, but something as simple as establishing your own score by having a credit card in your name – rather than just being an additional cardholder on the account. your partner or your spouse – can make all the difference.
How to improve your credit score
* Make sure you have bills or sources of credit such as a cell phone contract or credit card in your name (not in your partner’s or parents’ name).
* Check your credit score and report regularly. Make sure you recognize all research and financial products linked to your name so that you can find out if there is anything fraudulent.
* Pay your bills on time. Missing a payment can have a significant impact on your credit score.
* Register on the electoral roll as this provides proof of address and you have stable living conditions.
* While it’s good to keep your credit balances low, be sure to use up some credit each month. Paying bills in full, on time, shows you know how to manage your money.