Expert: 3 Ways Women Can Get Their Credit Back on Track ASAP
Having a high credit score is the key to improving your financial and purchasing power. Lenders and credit card companies look at this number when deciding whether or not to issue you a loan, as well as determining how favorable your rates will be. If your current credit score is lower than you’d like it to be, don’t worry too much — there are ways to improve your score that can get you back into good financial standing.
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In this “Financially Savvy Female” column, we’re chatting with Lisa Fischer, chief lending officer at Mission Lane, about the factors that could be affecting your credit score and how to improve it.
What are some reasons women may be more likely to have bad credit than men?
Women, on average, earn less than men, and this may contribute to them having lower credit scores. A 2022 report [found that] for every $1 that men make, women earn $0.82. Because of this, women may need to rely on credit products more heavily to pay off their expenses, which drives up their credit utilization and can result in a lower credit score.
Women also are more frequently in charge of making purchases for their households. A 2019 Nielsen study found that 89% of women reported having responsibility for shopping for daily household needs, meaning they may be putting more on their cards.
Why is it so important for women to have a good credit score?
It is important for women, and everyone, to have a good credit score because it unlocks access to more favorable loans, competitive housing and quality opportunities that are dependent upon an individual’s creditworthiness.
Unfortunately, about 100 million U.S. adults struggle to make progress in their financial lives due to low or nonexistent credit scores, which is a barrier to entering the mainstream financial system. Traditional financial institutions are hesitant to take on the risk associated with lending and providing services to customers that fall into this bracket.
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In addition, when you face a challenge that causes your credit score to drop, there are fewer banks and credit card companies willing to serve you, and what you do have access to can often be expensive or come with hidden fees.
What are some effective ways women can repair their credit if they currently have a low credit score?
Making payments on time is crucial to building and maintaining strong credit, and avoiding racking up extra fees in interest or penalizations. Missed fixed monthly payments can also be reported to credit bureaus and negatively impact your credit score.
Women should set reminders to take a look at their credit reports to make sure everything is accurate. Occasionally, there can be errors that can take a long time to correct.
Credit utilization, which tracks your balance versus your remaining available credit, is one of the most important factors in determining your credit score. In general, you want to keep your utilization rate at or below 30% of your overall limit. As you work to improve your credit, you may also want to look into increasing your credit limit, which can in turn reduce your utilization rate. But remember, an increase in credit limit does not mean you should increase spending beyond your means.
What are some general best practices to achieve good credit?
Making a financial plan and setting goals for yourself is a great way to achieve and maintain good credit. Write everything down, whether that is through a budgeting app, simple spreadsheet or notebook. This can help you hold yourself accountable for how you spend and save your money as you work to make payments. You’ll be able to visualize where your money needs to go, and where you may have some wiggle room — or lack thereof.
It’s also important to remember that there are options available that can help you reduce the burden of some monthly expenses. It is always possible to try and negotiate with cable or utility companies, either for a lower rate or an adjusted payment timeline. Third parties can also offer assistance. For example, Mission Lane partners with SpringFour, an organization that helps connect consumers to curated financial health resources in 30 categories, including food savings, employment resources, utility savings and more.
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GOBankingRates wants to empower women to take control of their finances. According to the latest stats, women hold $72 billion in private wealth — but fewer women than men consider themselves to be in “good” or “excellent” financial shape. Women are less likely to be investing and are more likely to have debt, and women are still being paid less than men overall. Our “Financially Savvy Female” column will explore the reasons behind these inequities and provide solutions to change them. We believe financial equality begins with financial literacy, so we’re providing tools and tips for women, by women to take control of their money and help them live a richer life.