A new study finds that bridging the gender wage gap is also about giving women the credit they deserve.
Credit analytics service Credit Sesame reviewed data for 3.5 million* of its 7 million users. The group was selected to reflect broad national distribution and a range of credit scores.
The results showed that men tend to have higher credit scores than women.
Is it because men are just better at managing their credit? It's not quite that simple.
A consumer's credit score helps lenders gauge how likely a person is to pay back the money he or she borrows. Low debt combined with a history of paying off debt quickly indicates a consumer carries a lower risk to borrow money.
To earn a high score, FICO, the company that determines credit scores, advises consumers to monitor their credit reports regularly, set up automatic payments for debt, and reduce debt whenever possible.
It turns out women beat men on these tasks: Credit Sesame found that women carry less overall debt — $21,171 on average, versus $25,225 on average for men. Men also tend to have higher credit card balances. Men’s average credit card balance is $3,854, while women’s average balance is $3,624.
The dollars say women are doing everything right — so why don’t their credit scores reflect that?
Women utilize credit slightly more frequently (21 percent) than men (19 percent). Women are also more likely (18 percent) than men (14 percent) to have five or more collections accounts, which does play into a person's credit score.
Credit Sesame chief strategic officer Stew Langille told Vox these results are "strong indications that income may be having more of a factor than what's being indicated by the credit bureau."
This is ironic considering salary is not formally calculated into FICO credit scores.
It also turns out men tend to have higher credit limits than women. Women's average credit balance is only about $200 less than men, but that debt is still a larger percentage of women's average credit limit. The higher ratio shows women are overextending their credit.
Among other criteria, credit limits are often determined with a person's annual income in mind.
Because of the gender wage gap, women, on average, make 79 cents to the dollar compared with men (and even less for women of color), and this difference can do some damage. (That wage gap also means there's less money to pay off debt.)
Even areas that are thought to level the playing field aren't as accessible to women. Education is touted as one way to rectify the difference. But a study by the American Association of University Women found that college-educated men were paid more than college-educated women after graduation.
Maybe the problem with women’s credit isn’t women. Even when women generally take better care of their credit and even make long-term investments in their futures like attending college, the wage gap — and the credit gap — still persist.
Correction: This article originally misstated Credit Sesame's sample size as 2 million. It was 3.5 million.