New research by Credit Karma shows that women have typically l ower credit scores than men and are more likely to fall into the ‘subprime’ category for lenders.
The free credit score provider says this can make accessing financial products such as personal loans, credit cards and mortgages more difficult or expensive and calculates the cost of the gender credit gap at £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.
Credit Karma anticipates that the gulf will widen as a result of the pandemic, as 20 per cent of women report that they have been made redundant or put on furlough, compared to 14 per cent of men.
Women are also more likely to have seen their income diminished over the last 12 months as a direct result of the coroanvirus pandemic.
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.
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Credit Karma commissioned Qualtrics Research to interview 1,012 UK adults between February 16 and March 5, 2021.
Fond out more about Credit Karma at CreditKarma.co.uk.
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