Virtually everyone is aware of the income disparities between men and women. This phenomenon has been debated and researched quite heavily in the labor market. But what about the gap that exists between men and women when it comes to lending and credit scores? This is a difficult subject to gauge, thanks to changes in regulations that bar lenders from discriminating against groups based on their demographics, including their race, color, nationality, religion, and gender.
Although this information may not be readily available, we are able to make some determinations on credit scores and credit usage by gender from reports issued by some of the major credit reporting agencies, namely Experian. The company published a major analysis of the issue in 2020 and broke down the gap between the genders. In this article, we look at the numbers for men and women and also look at some historical background.
- In the past, women faced many hurdles in accessing credit and were required to have male cosigners and large down payments to get loans.
- The Equal Credit Opportunity Act of 1974 prohibited several practices that restricted women's access to credit and their ability to be financially self-reliant.
- The average credit score of the two genders is now identical.
- Men and women carry essentially the same level of credit card debt.
- Men carry more debt than women overall, and in every category except for student loans.
How the Equal Credit Opportunity Act of 1974 Changed Things
It's hard to believe that women weren't allowed to take out a loan or apply for credit without a male cosigner as recently as the 1970s. And if they bought a home, they were typically required to make a larger down payment than male applicants with a similar credit history.
The Equal Credit Opportunity Act of 1974 was a major milestone in ending gender discrimination as it relates to accessing credit. And though the U.S. still suffers from gender-based wage gaps, credit availability and usage between women and men are largely aligned today. The table below shows the divergence in scores and the average debt balance according to type for men and women.
|Average Debt and Credit Metrics by Gender|
|Debt/Credit Metric||Men||Women||Difference for Women|
|Average credit score||705||704||- 1|
|Total debt balances||$337,957||$310,004||- $27,953|
|Mortgage debt||$211,034||$192,368||- $18,666|
|HELOC debt||$ 47,017||$ 42,746||- $4,271|
|Auto loan debt||$ 20,645||$ 17,747||- $2,898|
|Student loan debt||$ 35,188||$ 36,131||+ $943|
|Personal loan debt||$ 17,716||$ 14,780||- $2,936|
|Credit card debt||$ 6,357||$ 6,232||- $125|
|Number of credit cards||3.6||4.5||+ 0.9|
Source: Women and Credit 2020: How History Shaped Today’s Credit Landscape
This isn't to say there are no differences in how men and women apply for and use debt and credit. Indeed, men carry more overall debt than women, including across most debt categories. But women carry more student loan debt and often have more credit cards. We go a little more in-depth into this in the next section.
Experian updated the average credit score for women to 705 in Q2 2020.
Credit and Debt for Women vs. Men
There really isn't a definitive way to say why there is a difference between the credit scores of men and women or even if one truly exists. This is largely due to the ECOA.
Any parity that does exist between men's and women's average credit scores is not entirely new. The numbers were similarly close in the mid-2010s, and both averages have risen 10 points since the second quarter of 2015. In modern-day credit scoring models, there is no consideration of gender factors in scores.
There are some differences in how men and women accumulate the debt that they carry. Overall, men have about 9% more debt on average than women: approximately $338,000 in total debt balances versus $310,000 for women. This difference comes from holding more debt than women in every debt category but one. Men hold about 10% more mortgage and home equity line of credit (HELOC) debt, 16% more auto loan debt, and most strikingly, 20% more personal loan debt.
For their part, women hold slightly more student loan debt on average. But the increment over men's student loan balances is less than 3%. Women also tend to have more credit cards, averaging 4.5 cards as opposed to men's average of 3.6 cards. When it comes to credit card balances, the difference is just $125 between the genders. At just 2%, this difference is not considered statistically significant.
The Bottom Line
Legislative changes in 1974 allowed for greater access to credit by American women, enabling them to take out loans and credit cards without relying on male cosigners, or being unfairly penalized when taking out a home loan. In the years since, women have largely climbed to credit and debt-equity, achieving average credit scores that are identical to men's.
The makeup of debt does differ between genders, with men taking on more debt for housing, cars, and other items, while women as a group have taken on slightly more student loan debt. Although the total average debt balance of men is about 10% higher than women's total debt, the identical average credit scores imply that there is a similarly responsible approach to the handling of credit across genders.
Experian is one of three major credit reporting agencies in the U.S., and its 2020 analysis of debt and credit metrics by gender draws on aggregated data collected from the millions of consumer credit files it tracks.
Experian. "Women and Credit 2020: How History Shaped Today's Credit Landscape."
Office of the Law Revision Counsel. "15 USC Chapter 41, Subchapter IV: Equal Credit Opportunity."
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