You may be familiar with the gender pay cap, which indicates that women earn less than men, even in similar roles, industries and qualifications. In fact, the Pew Research Center claims that last year, women earned only 84% of what men brought home. Or, to put it another way, it would take an additional 42 days for a typical female worker to earn the same amount of money as a man in a similar role.
But now new data is revealing another point of disparity – the borrowing gap.
Men have more leeway with lenders
Research from the Federal Reserve Bank of Philadelphia shows that men don’t just make more money than women. They can also borrow more.
In fact, male borrowers have, on average, $ 1,323 higher credit limits than female borrowers. This data takes into account factors that go into setting borrowing limits, such as income and credit scores. In other words, among men and women with similar income and credit, men have even more leeway to borrow.
On the one hand, a difference of $ 1,323 in borrowing power is relatively small, especially since women only earn $ 0.84 for every dollar earned by men. At the same time, this is yet another example of how women seem to be at a glaring financial disadvantage.
How to improve your borrowing options
No matter what gender you identify with, there are steps you can take to open the door to more borrowing opportunities. The first and perhaps the most important is to focus on building a strong credit rating. This means paying all bills on time, keeping long standing accounts open, maintaining a healthy mix of debt, and not asking for too many loans or credit cards at once.
Keeping your credit card debt to a minimum can also help improve your credit score. This is because credit utilization ratios play an important role in determining credit scores. These ratios measure the amount of credit that a borrower is using at a time.
Then, it is worth working on increasing your income if you are looking to increase your borrowing options. You can do this in several ways. First, know what you are worth. The salary you earn does not necessarily reflect what you should be paid for the work you do.
Look up salary data for your role, industry, and geographic location (sites like Glassdoor are a good resource). If you find that the average person with your job title in your city makes $ 70,000 a year and you only receive $ 64,000, that alone could justify a raise.
Second, consider getting a side job in addition to your main job. This additional income will count when lenders review a loan application.
It is unfortunate that women have long been underpaid compared to men. Now, it appears that a borrowing deficit also exists, however small. It’s not the best news, but unfortunately it’s not that surprising either.