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How being a woman can ding your credit score

(Daniel Acker/Bloomberg News)

Women have less debt than men. But despite their lower debt loads, they still have lower credit scores.

Why the disparity?

It may all come down to the fact that men still make more money, on average, than women do, according to a new report from Credit Sesame, a website that analyzes credit data.

Let’s go over the numbers. Women have an average credit score of 621, compared with an average credit score of 630 for men, according to the analysis of 2.5 million Credit Sesame users.

At first blush, that doesn’t jibe with the fact that women also have smaller debt loads, on average, when compared with men. Women on average owed $21,171 in overall debt as of January, compared with $25,225 for men. (Generally speaking, high debt loads tend to drag down on a person’s credit score because banks like to see that consumers are not using up most of their available credit.) 

But the picture starts to make sense when you see the different ways that men’s scores may be boosted by their typically higher paychecks. 

For one, a bigger paycheck could leave them with more cash left over after the bills are paid — even if they have bigger debt payments. That would result in a lower debt-to-income ratio, a measure that lenders consider when deciding whether they think a borrower can afford to pay back a loan. 

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The report found that men have higher credit limits, in general, when compared with women — and chances are that their higher earning power may have contributed to that.

So even though men have higher debt loads, the study found, they actually use up less of their total credit. (Using too much of your available credit can hurt your credit score.)

Of course, there may be many factors at play, such as differences in the types of loans borrowed. But when it comes to pay, women earn 79 cents for every dollar earned by men, according to the Census Bureau.

There are a lot of reasons behind the pay gap. Some of the fields dominated by men, such as finance, tend to pay more. Women may be prone to spending more time out of the workforce than men to care for children and other family members. And some women may face discrimination that leads to less career development and fewer promotions.

Whatever the driver, the pay gap can have lasting effects on women’s financial health, even contributing to a gender gap in retirement savings. And the issue may be around for a while. Women may not see equal pay until 2059, according to estimates from the Institute for Women’s Policy Research.

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