We’ve come a long way since the first UK credit card was launched half a century ago. Gone (for the most part, anyway) are the bad old days of “credit sexism”, when banks and stores considered women to be a higher-risk investment than men. As a result of that skewed view, women in the 1960s and into the mid-1970s generally had to get their fathers or husbands to sign for most loans, even if the woman in question happened to earn more than the man in her life.
This was despite the fact that women had long been in charge of household budgets, and that by 1971, 52 percent of women aged 20 to 64 were in the work force (up from 36 percent in 1951). It didn’t matter; women were still considered second class citizens by lenders.
The most blatant discriminatory practices have been regulated out of existence, and good riddance to them. The Sex Discrimination Act of 1975 put the final nail in the coffin of discrimination against women purchasing goods or services, including loans or credit. Even so, as late as 1978, some retailers were still asking for male guarantors.
Today that’s no longer the case, but problems remain. There is still a gender gap in financial inclusion – ranging from wages for adults (though that gap is shrinking amongst men and women who do identical jobs) to pocket money for kids. And women with credit problems have their own set of challenges that in some cases are worse than those faced by men.
The gaps that remain
The most prominent obstacle to eliminating the wage gap is that more women need to get into higher-paying industries and positions. It is not as much of a glass ceiling as it once was, as women are increasingly assuming higher-paying executive positions, but it is still more common for males to be offered those positions than females. As such, the wage gap is not strictly a pay discrimination issue, so much as a lingering underrepresentation of women in those management and executive positions.
Despite the trending toward equanimity in salaries paid to both genders, the “wage gap” remains significant when comparing the amount of pocket money that parents give their children, with boys being given significantly more pocket money than girls. While it is possible to legislate fairness in the workplace, it is both impossible and inappropriate to attempt to regulate parents’ decisions where their children’s finances are concerned, or, for that matter, to attempt to regulate parents’ attitudes. And it would appear that the attitudes that caused the wage gap in the business and financial world remains strong in the family structure. There are other, truly worrying trends as well.
More young women than men are going bankrupt
Along with the increase of women in the workplace and their modest placement in leadership positions, they are seeing their consumer debt levels, primarily in the form of credit cards, increase as well. With that increase in debt comes a proportional increase in the number of women with debt problems. According to 2015 figures published by the National Insolvency Service, the number of bankruptcies overall is down in England and Wales, but for the first time in history, more young women are now finding themselves personally insolvent than men. Amoung young adults aged 25 to 34, 22.2 of every 10,000 women are applying for bankruptcy or another insolvency status, compared with 21.2 men.
It would be both inaccurate and condescending to claim that the increase in the number of women facing debt problems was due to irresponsible spending or poor financial habits. Younger people entering the job market are more often feeling the burden of crushing debt from college loans, crippling mortgages on skyrocketing house prices, or sharply increasing rent prices. When one considers the fact that salaries, especially those paid to younger workers, have fallen far short of keeping up with expenses, it is not surprising that many have found it necessary to incur additional debt, just to meet their basic living expenses. In 2015, Citizens Advice reported that young people’s average debt to income ratio is close to 70 per cent, while individuals in the 60-64 age group’s debt to income ratio is only 11 per cent. With women’s earnings overall still falling short of being equal to men’s it is likely that many women’s debt to income ratio falls in the higher ranges.
Clearly we need better long-term solutions, particularly regarding the housing market. Also needed are better independent advice, guidance and support to help women – and men – who are wrestling with debt.
A possible short term solution for some
Since so many of the women who are financially struggling have poor or no credit, they often find that their options are limited when they are faced with a financial emergency. In too many cases, the loans for which women do qualify are too limited in the amount available, and the short payoff period would leave them as unable to pay off the new debt as they are to meet their existing debt payments.
One alternative that women should consider is a guarantor loan, for which a family member or close friend agrees to accept backup responsibility for repayment, should the borrower be unable to meet the loan’s terms. A guarantor loan can be for a significantly larger amount than a payday loan, with payments spread out over a longer period. The interest will be higher than more traditional loans, but not as high as a payday loan or a cash advance on a credit card.
Because that backup responsibility can leave the guarantor in a financial bind of their own, potentially causing a negative entry on both the borrower and the guarantor’s credit score, the borrower needs to be certain that she will be able to repay the loan according to its terms. Failure to do so could result in irreparable damage to the borrower and guarantor’s relationship.
Before taking out a guarantor loan, or any other type of loan, for that matter, you will want to compare the terms and costs offered by different lenders, as competition in this segment of the financial industry is intense, and individual lenders vary the rates, terms, and fees they charge to attract customers. Compare what each offers and choose the lender whose offerings best meet your needs before applying.
Clearly, a guarantor loan is a short-term solution, and your long-term focus should be on improving your financial literacy, implementing a workable budget and savings plan, and building or rebuilding your credit. Just ask some of the older women who never created their own credit history and are still feeling the ramifications of yesterday’s credit sexism as a result. Fortunately today’s young women – and even those who aren’t so young any more – have many more opportunities to build a solid financial foundation than women did in the past.