Research by Credit Karma shows that women typically have lower credit scores than men and are more likely to fall into the ‘subprime’ category for lenders.
The free credit score provider explained this can make accessing financial products and services such as personal loans, credit cards and mortgages more difficult or expensive and calculates the cost of the gender credit gap at a staggering £16,913 across their 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 also 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.
Commenting on the findings, 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 per cent of women reporting that they don’t know their credit score compared to 35 per cent of men, and are encouraging women to take a more hands-on approach to managing their money.
Five tips for strengthening your credit score
Credit Karma have shared five tips to help women become more aware of their credit score and how to improve it:
Make sure you have some bills or sources of credit in your name (not your partner’s or your parents’ names), such as a mobile phone contract or credit card. Lenders can’t assess your creditworthiness if you have never had credit
Check your credit score and report regularly – you can do this for free at CreditKarma.co.uk and other credit score websites. Ensure that you recognize 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, even if it’s only by a day or two
Get on the Electoral Roll – this provides proof of address and that you have stable living arrangements
While it’s good to keep your credit balances low, do use some credit every month. Paying bills off in full, on time, shows that you are good at managing your money
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