The U.K. has come a long way since suffragette Emily Davison threw herself in front of the King’s horse at the 1913 Derby. Yet women still need to work hard to make themselves economically appealing.
In a world where #MeToo and pay transparency campaigns are commonplace, it may be hard to believe that there’s still disparity between how a woman and a man are viewed by lenders. This gender credit gap is down to a number of factors, some of them unwittingly created by women themselves.
Perhaps it’s because women have more gaps in their employment history or are still labouring under the societal stereotype that men take charge of the finances. And there are still some staggering statistics, such as those reported in the Financial Times, that show 90% of women still work for companies that pay them less than male colleagues.
Whatever the reason, female financial literacy and confidence seem to lag significantly behind. As a result, it often follows that women are less likely to be financially independent and therefore have fewer savings, lower earning potential and are considerably less attractive to lenders — should the need arise.
If as a 21st-century woman you are shaking your head and saying, “No, that’s not me,” perhaps ask yourself a few questions: Whose name is on the household bills? Do you have your own credit card? Who organised the car insurance? Have you opened a bank account in your own name? If the answer is “mine, yes, me, yes,” then congratulations, as research undertaken by Credit Karma shows you are one of the few.
- Sisters are not doing it for themselves
- How a partner can bring you down … in the credit stakes
- Reboot your credit scores
Sisters are not doing it for themselves
Did you know, for example, that up to 31% of women have some or all of their financial agreements in their partner’s name? Of course, at the time it may have seemed simple and obvious to organise bills in this way, but over the long term it can be damaging to your credit scores — especially if you find yourself in a situation where you have to navigate the choppy waters of financial freedom alone.
You are also particularly at risk if you are heading toward retirement, according to the International Monetary Fund, which states that because women spend less time in the labour market, they are less likely to reach highly paid senior positions and face increased poverty in old age.
And while it may seem like a case of it never rains, but it pours, the pandemic hasn’t helped either.
“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,” said Akansha Nath, Head of Partnerships at Credit Karma. “There is no reason 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.”
How a partner can bring you down … in the credit stakes
The biggest debilitating factor for a woman’s credit score is financial association — this is when you share a credit card, mortgage or an account with someone else. By doing this you automatically share credit score information too. Such accounts can make life simple, but they also have a downside.
First of all, your partner’s credit score may not be as healthy as yours, especially if they are a bit slapdash when it comes to their own bills.
Secondly, having an account that isn’t purely in your name limits your credit exposure, meaning that if you had to go it alone lenders have less confidence in you. According to StepChange, the debt charity, these factors — as well as gaps in employment or part-time hours — can mean that women are more likely to be at risk of finding themselves in debt.
Reboot your credit scores
So, how can you get things back on an even keel?
Educate yourself — By this we mean improve your financial literacy. Men have done this because society expects them to, and there’s no reason why you can’t understand contracts or lending agreements just as well or better.
Be brave — Take out a new credit card or mobile phone contract in your own name. This will give you credit exposure, which shows lenders that you can be relied upon financially and will improve your credit scores. This in turn is important because it determines your borrowing potential and whether you will be able to apply for credit cards, mortgages and loans.
Punctuality is everything — Pay your bills on time. If you miss payments or even delay them by a few days, this can have an adverse effect on your credit score. Take a look at our Help Centre for the other key factors that can affect your rating.
Back to Emily Davison — Yes, your being on the electoral roll is vitally important. Not only do you get that all-important right to vote, but it shows that you have stable living conditions and proof of address.
Check and check again — You can check your credit scores to see if there is any faulty information or false associations bringing them down. If you find any, let us know as we can help you dispute errors. Take a look at our Help Centre to see how.
Bottom line
The good news is that things are starting to change. According to ourworldindata.org, the gender pay gap has decreased in recent years, and a survey by MoneySuperMarket showed how 47% of women are now the primary breadwinner and responsible for all household bills. There’s no better time to take control of your bills and your credit scores. Make the most of your financial girl power.