Women and Credit: Why Your Credit Matters
Most young women cannot imagine applying for a credit card or loan and being turned down because of their gender. But access to capital is a relatively modern right for women.
Don’t take it for granted: here’s how women got credit and how to make the most of it.
Access to credit is essential
Credit is a basic tool for financial independence. Regardless of their marital status, women need credit in their own name to build credit.
“With credit comes power,” says Stacy Feiner, business psychologist and coach. “When women establish financial security, they may feel more comfortable planning for the future and taking risks, such as starting or growing a business. ”
“Women without financial means have fewer opportunities than men in situations where they need to build or rebuild financial security,” says Feiner. “It can be addictive, which increases the lack of physical and emotional security.”
Women have lacked credit for centuries
Some people may be surprised to learn that women’s ability to access loans and make financial decisions is relatively new.
At the turn of the 20th century, married women were not seen as legal entities independent of their husbands, resulting in the financial enslavement of women, says Hermina Batson, president-elect of the Financial Women’s Association of New York. Women could not manage their own income, enter into contracts or own property separately from their husbands.
In 1839, Mississippi became the first state to give a married woman the right to own property in her own name, and New York followed in 1848 with legislation that became a model for other states.
“But it took decades for women across the country to gain full control over their property, savings and income,” Batson said. “Financial discrimination continued into the 1970s.”
Giving Credit to Women: Breaking Down Barriers to Financial Freedom
Some significant advances in financial equality for women came in the 1970s with a landmark Supreme Court ruling and a new law banning discrimination in lending.
In 1971, the Supreme Court in Reed v. Reed first struck down a law for treating men and women differently. The case, defended by Ruth bader ginsburg, challenged a rule that preferred men to women to administer estates and gave a grieving mother the right to administer the estate of the son she had lost.
A few years later, women had the same access to credit as men with the Equal Credit Opportunities Act of 1974. This meant that a woman no longer needed a male co-signer every time she did. ‘she was applying for a loan.
When it was promulgated, the ECOA prohibits discrimination in lending based on sex or marital status. Congress then amended the law to prohibit discrimination in loans based on race, color, religion, national origin, age, or income.
The ECOA allows consumers to use household income when applying for credit, which opened the door for women who were not working outside the home to obtain credit. Additionally, creditors who assess income may not reduce it based on gender or marital status.
Own and develop your credit
“Women are less indebted in all categories except student loans,” says Batson.
In addition to monitoring credit, these steps can boost your financial confidence:
Get credit in your name. Don’t hesitate to open credit cards or loans in your name as this can help you build or maintain your credit rating. If you are a Authorized user with a high credit score, jump at the chance to get your own card.
“Widowed or divorced women who did not have independent credit before or during marriage might have difficulty obtaining loans or credit cards,” Batson said.
Consider a co-signer. If you are not approved for your own loan, ask a co-signer to support you until you have established the credit history to qualify on your own.
Apply for a secure credit card. These cards typically charge an annual or monthly fee and require a security deposit that is usually equal to your line of credit. But you will have the possibility of having a positive financial record if you cannot otherwise qualify for a credit card.
“The beauty of some secured credit cards is that the issuers will upgrade you to a traditional credit card. youunsecured card after a period in which you made payments on time and demonstrated responsible use, ”says Batson.
Pay your bills on time. It sounds simple enough, but it can be a challenge for some people. The most important factor in your credit history is that you pay on time, and lenders look at that history to determine if they should extend credit.
“If you have a single late or skipped payment, it will affect your credit score,” Batson said.
Limit use of credit. This term refers to the percentage of total credit that you use. If you have $ 10,000 in approved credit and $ 3,000 in unpaid charges, your usage rate is 30%.
“If you keep it below 30%, it can increase your credit score and lead to higher credit limits,” Batson explains.