Mind the gender credit gap – how else is the pay gap impacting women’s finances?
Research from ClearScore has found that the gender pay gap is affecting women's credit scores
A new analysis by ClearScore of 50,000 anonymised credit histories and pay data reveals that the gender pay gap has a negative impact on a woman’s finances beyond her payslip each month.
The study found that women’s credit scores lag behind those of their male peers. On average, women score just 330 out of a possible 700 compared to the male average of 345. This credit conundrum means women are less likely to be accepted for the best financial products on the market and could end up paying more for credit than men.
At the root of the credit inequality is the gender pay gap; on average women earn 20% less than their male counterparts, taking home just £24,000 to the male average of £30,000. As a result, women are forced to use more of their available credit card limit each month. ClearScore data suggests women use nearly two fifths (39%) of their limit compared to men who use just over a third (35%). The ideal amount is around 25-30%, as using more can negatively affect your credit score.
Another reason for the credit gap is that more than a third of women (36%) do not have a credit card in their name. This can keep scores low because lenders like to see evidence that a borrower can responsibly manage credit on a regular basis.
However, the research also shows that when you remove the pay-gap effect, women are actually the better sex when it comes to sorting their finances. If average scores are compared by salary band, the results are reversed and women consistently have slightly better credit scores than men. It is only because more women fall into the lower pay-brackets that the overall average for women is lower.
To address the balance, Anna Kilmurray from ClearScore shares her tips for how you can improve your credit score:
- Access your score regularly and correct any errors on your credit report.
- Ensure that your name is on at least some of your utility accounts – even if you live with someone else.
- Consider applying for a credit card if you have a slim credit history.
- As soon as you get a new credit card, always set up a minimum monthly direct debit to avoid missing a payment.
- Make sure you are registered on the electoral roll.
- If you move, don’t forget to tell your bank.
- Don’t use too much of your available credit limit – it’s best to use around 25-30%.
Anna Kilmurray, ClearScore, “Women are being hit twice as hard by the gender pay gap; firstly in their bank accounts on pay day and secondly, by the financial deals they’re likely to be offered by the bank. There are steps everyone can take to bolster their credit score which could improve the terms of the credit they take out. The main thing is to make sure you have some form of credit in your own name and to use it carefully.”