Can Your Gender Affect Your Credit Score?

Credit Sesame recently published a study showing that men in general have better credit scores than women. The study, taken by surveying 2.5 million of their 7 million members, found:

• Men have more debt, yet higher credit scores. The average credit score for men was 630*; for women it was 621. Men’s average debt was $25,225 and for women it was $21,171. Debt to income ratio averaged 17 for men and 18 for women.
• Men had more credit card debt than women. Men’s average credit card balance was $3,854 for men, $3,624 for women. Credit limits were higher for men as well: average credit limit was $20,043 for men and $17,159 for women. Men’s percent utilization of credit limit was 19% for men, 21% for women.
• Women are more likely to have collection accounts. 57% of men had no collection accounts; only 53% of women did. Both 29% of men and women had one to four collection accounts. 14% of men had 5+ collection accounts, while 18% of women did. In some states, a third of all women had collection accounts, while only 20% of men did.
• The more debt a consumer has, the better their credit score tends to be. However, men with the same amount of debt as women tended to have better credit scores. For instance: men with $150,000 of debt averaged a 700* credit score, while women with the same debt averaged a 690 credit score.
• The older you are, the better your credit score. However, men had better credit scores than women throughout life, with the largest credit score gap (15 points) occurring when men and women reach the age of 65.
• Where you live also tends to influence credit scores. Zip codes with the highest credit scores for men had lower scores for women in every case. Large metropolitan areas in the East and West had the highest credit scores: New York City averaged a 734* credit score for men with women having a 728 score. Only in areas with the lowest average credit scores did women have better credit scores than men. For instance in Columbus, OH, men averaged a 570 credit score; women averaged 575.

*Credit scores range from 300 to 850, with 850 reflected excellent credit.

Main Difference in Credit Scores – It Boils Down to Income

While income is not a factor when calculating credit scores, having more money definitely makes it simpler to manage credit: more money means making payments is easier to do. More money also means loans can be paid down at a faster rate; Bloomberg Business calculated that it may take woman one year longer to pay back student loans. The cycle of higher credit feeds on itself: better credit management leads to higher credit scores and higher credit limits on credit cards. Higher limits mean you can carry a larger balance and still have low credit utilization rates. The lower your credit utilization (the ratio of what you owe to your credit limit), the higher your credit score. Credit utilization is 30% of your credit score.

Women in general make 79 cents to each dollar that a man makes. This gender income inequality occurs across all types of jobs, ages and races. Why do women get paid less? The reason may be two-fold: there’s a cultural bias in the perception of women’s competence as compared to men and also that women are usually responsible for child-rearing, which can get in the way of working 100 hour workweeks, the kind of face time that usually gets rewarded with promotions and partnerships.

President Obama announced in January 2016 a proposal that addresses the gender pay gap. Under his proposal, companies with more than 100 employees will be required to report data on pay broken down by gender, race and ethnicity. This “outing” of pay grades may pressure companies to pay their employees more equitably.

Less pay can also be responsible for the higher incidence of collections of women over men. If you are short on cash, you may not be able to pay all of your bills on time, and if enough time lapses, these bills can go into collections. Collections are credit score killers — one collection can drop your credit score by 100 points or more, depending on where you start out on the credit scale.

Debt to income ratios are super important when it comes to obtaining a mortgage. If you make less money, your debt ratios will skew higher, which is bad.   Conventional loan guidelines like to see no more than 36% of your income going towards your mortgage; FHA guidelines allow 42%. Mortgages are considered installment loans and having an installment loan can help your credit rating as the credit scoring models like to see a mix of credit, both revolving (credit cards) and installment (mortgages and auto loans). Your mix of credit accounts for 10% of your credit score.

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