Ahead of International Women’s Day on Wednesday 8th March, TotallyMoney analyses national credit report data to investigate the UK’s financial inclusion gender gap, and the key drivers behind it.

• On average, women have a 10 point lower credit score than men, a gap which exists throughout their entire lifetime
• Lenders are 16% less likely to provide women with pre-approved credit card offers, and women find themselves eligible for 22% fewer cards 
• Women receive higher credit card APRs than men (0.8 percentage points)
• Women are given a 31% lower credit limit across all card accounts

Additional research by TotallyMoney and PwC found that 10.7 million UK women are locked out of accessing mainstream financial products.

Below, we cover the impact of a poor credit score, the diffrerences in credit scores between women and men, the drivers behind this, and quotes from Danielle Treharne of the Financial Inclusion Commission, and TotallyMoney CEO, Alastair Douglas.

The impact of a poor credit score

Last year, research found that for a credit card balance of £2,472, those with a poor credit score could be paying an extra £58 p/m (£693 p/a) in interest when compared to those with a good credit score.

In addition to cards, a better credit score can open up a bigger range of borrowing options, with more competitive offers and better rates for loans, mortgages, overdrafts, and other general finance products. A poor credit score can also force customers onto more expensive prepaid energy tariffs, pay as you go sim deals, result in higher car insurance costs, and impact one’s chances of renting a property. 

Lower limits, higher APRs, and shorter interest-free offers, combined with paying more for everyday essentials add further pressure to people’s finances. This can make it more difficult to keep up with commitments, potentially compounding long-term credit score damage.

Mind the gap

Last year, TotallyMoney and PwC investigated the UK’s ‘under-served’ population, people with low financial resilience, and who may struggle to access credit. Taking a closer look, it shows women are more likely to be under-served than men, with 10.7 million women locked out of accessing mainstream credit products.

The research also discovered that women are 38% less confident in choosing the right financial product for themselves. So while they may not be under-served, they could perceive themselves to be.

Through analysis of ~2 million credit reports, TotallyMoney found that on average, women have a 10 point lower credit score than men, are less likely to be offered credit (16% less likely to be pre-approved for a credit card, and are eligible for 22% fewer cards), and are more likely to receive a worse deal (an APR which is 0.8 percentage points higher). It also found that women are provided with 31% less credit across all credit card accounts than men. Full analysis of what makes up a credit score, and the differences between those of women and men can be found towards the bottom of this page.

Driving the divide

In addition to assessing one's ability to keep up with repayments (above), lenders review how much a customer can afford to borrow. This includes income, type of income, and regular outgoings. Credit reports are largely built around the money people earn, and how they use it. So, if incomes are different, then the way people manage their money, and the options available to them will be different.

ONS data shows that among full-time employees, women earn 8.3% less than men. Meanwhile, the part-time pay gap shows women earn 2.8% more than men. However, with more women than men in part-time employment, and part-time workers generally earning less, the gender pay gap across full-time and part-time employees is much larger — sitting at 14.9%.

The pay gap increases for mothers, older women, and women caring for relatives, children and grandchildren. Separate research estimates that women provide £382bn of unpaid childcare per annum, with an additional £50bn worth of unpaid adult care‖. 

TUC research has found the pay gap to start as early as apprenticeship level (18.4%), with women being less likely to find a permanent position on finishing their course. It goes on to have life-long implications, which result in a pension savings gap of £136,800, meaning women’s pension wealth is a third (33.5%) of men’s.

Research from the FCA found just 42% of all adults have confidence in the financial services industry, with only 35% agreeing that firms are honest and transparent. This lack of confidence increases for the vulnerable, and over-indebted. 

Danielle Treharne of the Financial Inclusion Commission comments:

“According to the FCA’s 2022 Financial Lives Survey, women were more likely to have low financial resilience or be in financial difficulty. In fact, 28% of women surveyed had low financial resilience, compared to a whole population average of 24%. It is shocking that in 2023, such statistics exist, but this is a story told time and again across credit, pensions, and savings. 

“This fantastic research by TotallyMoney further serves to emphasise the financial inclusion gap affecting 11 million women.

“But this goes beyond the gender pay gap, and additional structural problems continue to exist in 21st century Britain. Interrupted work patterns, unaffordable childcare costs, and low levels of engagement with financial products mean women are left behind. 

“The Financial Inclusion Commission is calling for the introduction of a Government-led national financial inclusion strategy and a ‘must have regard’ to financial inclusion for the FCA. These will help to streamline numerous initiatives and ensure Government and regulator accountability on tackling financial exclusion affecting various groups, including women. 

“Personally, I am delighted to see how forward-looking FinTechs, such as TotallyMoney, are leading the way with representation of women in senior positions. These women will be able to provide the crucial perspective needed to tackle structural issues affecting women and their finances nationally.”

Alastair Douglas, CEO of TotallyMoney adds:

“As it stands, the credit system is flawed. Half the population shouldn’t be struggling, and women shouldn’t be disproportionately disadvantaged. The financial services industry should be striving for equity, but in reality it’s struggling with transparency, and trust. 

“Giving people the tools they need, and putting them in control of their own data is key. Open Banking can help, and customers can leverage its power to better understand, and manage their own finances. It also provides lenders a more accurate, live view of somebody’s affordability. 

“However, it doesn’t address the gender pay gap and its impact on a woman's finances over her entire lifetime. At its current level of 14.9%, women are working the equivalent of two months free — each year.

“Change starts from the top, with firms ensuring that women are represented at all levels of business, and that processes are debiased. This begins during hiring, through to performance assessments, and reporting on progress.

“At TotallyMoney we’re committed to our mission of helping everyone move their finances forward. We understand that if we are to truly understand the needs of our diverse customers, we need to begin with an inclusive and fair environment throughout our business.”