Why Do Women Typically Have Lower Credit Scores Than Men?
The wage gap between women and men is nothing new, but one recent study is making headlines as this consequence of disparity also affects credit scores.
According to a report from CreditSesame.com, women have lower average credit scores (621) than men (630). Although women generally have less debt than men, their analysis of 2.5 million Credit Sesame users tallied that men’s scores are boosted typically because their paycheck earnings are higher.
The Frisky also points out that overall it’s a domino effect: “Women’s income tends to be lower than men’s, which means that their debt-to-income ratio is higher than men’s (18 percent for women to 17 percent for men), both of which factors influence women’s credit limits, which also tend to be lower, which then means that women are using more of their credit limits than men are.”
The analysis also highlights that men carry more credit card debt than women (average balance of $3,854), but because their credit limits are higher, they actually are using less of their available credit. But because their credit limits are higher, they are using less of their available credit.
In contrast, women are more likely to have nearly five or more collection accounts than men. This can causes a drastic drop in a consumer’s credit score.
While the report also says that credit discrepancy increases with age, there are still a number of other personal factors that can influence your credit score. Nevertheless, this shows just how the pay gap can have long-lasting effects on a woman’s financial health. Estimates from the Institute for Women’s Policy Research say women may not see equal pay until 2059.