Women are paying up to £17,000 more than men to borrow money over their lifetime, according to new research figures.
The study, conducted by Credit Karma, revealed that women were borrowing on average £152,403 during their lives compared to £135,490 for men.
This can have an impact on accessing personal loans, credit cards and mortgages, among other financial products, the personal finance company found.
Here we take a look into why there is a financial inequality, what a credit score expert makes of the findings and some top tips for improving credit scores...
Why are women paying more to borrow money than men?
According to Credit Karma, women have lower credit scores on average than men, and are more likely to fall into the subprime (below 550) category for lenders.
It found that nearly a third (31%) of women have some or all of their financial agreements in their partner’s name - limiting credit exposure and a personal credit rating.
The study also discovered that women are more likely to rely on ‘buy now, pay later’ offers than men, which have no positive impact on personal credit scores.
While financial disengagement, generally, 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.
What impact has the Covid pandemic had on this imbalance?
The last 12 months have seen many people’s income drop due to the restrictions imposed by the Covid pandemic to limit the spread of the deadly virus.
There was a slight imbalance between the sexes as 32% of women saw their income decrease over the last year compared to 30% of men.
Credit Karma anticipates the credit score 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.
Head of Partnerships at Credit Karma, Akansha Nath, said it was “concerning that women face being affected disproportionately in the long-term”.
She added: “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.”
How can I improve my credit score rating?
Personal finance company Credit Karma, which provides free credit scores to consumers, is encouraging women to take a more hands-on approach to managing their money.
Finance expert Ms Nath outlines her top five tips for strengthening your credit score:
- 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’ve never had credit.
- Check your credit score and report regularly – you can do this for free at CreditKarma.co.uk. 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 – 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.