Women are smarter credit card users than men, according to new data.  Here's why and how you can use credit to improve your score
Women are smarter credit card users than men, according to new data.  Here’s why and how you can use credit to improve your score

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Women make better decisions with their credit cards than men, according to new research.

Despite social stereotypes who have long (and wrongly) equated women with emotional spending and impulse buying, data shows that they are often more financially savvy than their male counterparts when it comes to credit cards.

In fact, women are “significantly” more likely than men to open a credit card to build credit, while men are more likely to get their first credit card for big purchases. It is according to a recent study by Lanterna personal finance site owned by SoFi, analyzing credit card usage and sentiment in the United States

Here’s more information on what the experts have to say about how women build and use credit, and tips for anyone looking to start building great credit.

Women are less impulsive with their credit cards

According to the Lantern by SoFi study, 65% of women cited building up credit as their main reason for applying for a new credit card, compared to 51% of men.

Men, on the other hand, are more likely to display impulsive credit behaviors. For example, 66% of men say they got a credit card to get a specific discount and canceled the card immediately, compared to 47% of women. And around 30% of men requested a new card specifically for the sign-up bonus, while only 18% of women did the same.

Women also tend to have lower balances. Almost half of women (49%) reported having a balance of $2,500 or less, and 16% had none. In contrast, 39% of men have a balance of $5,000 or more.

Women face credit challenges

Unfortunately, good credit habits don’t always translate to credit gains for women.

According to the survey, they were twice as likely (12%) to see no improvement in their credit after getting a credit card, compared to men (6%). Men are also more successful in negotiating lower interest rates: 69% of men said they got a lower interest rate after talking to their credit card issuer, compared to just 46% of women.

And other data shows that building and maintaining good credit can be even more difficult for women at the intersection of other groups traditionally underrepresented by the credit system — such as immigrants and people from color. In fact, Black and Hispanic Americans are more likely than other races to have no credit at all, according to Consumer Financial Protection Bureau data. There’s also a strong correlation between income and credit — residents of lower-income neighborhoods are more likely to lack credit than those in higher-income neighborhoods, the study found.

The disparities between these demographics can make it even harder for some women to access credit and start building their scores.

How Women Think About Credit and Financial Success

Despite persistent social and gender disparities, women’s and men’s FICO scores are on average almost identical (704 and 705, respectively), according to the latest Data from Experian.

Some research suggests that women are simply more careful with their finances. According to a american university studywhich analyzed the Federal Reserve’s 2018 consumer finance survey.

Women are also actively pursuing their own financial education and independence, says Jane Kellycredit expert and owner of Kelly Group Coaching.

“I think we want to know more about [credit]says Kelly. “When I offer free credit education courses, I see more women enroll…I love that we educate ourselves. And I feel like we’re using credit in a healthy way, not because we need it — because we see the big picture. And that is our financial independence.

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How to build credit with a credit card

If you’re looking to build credit, one of the best ways to start is to use the right credit card — so you can develop healthy credit habits to help you qualify for everything from personal loans to mortgage in the future. Here are some ways to use your card responsibly and increase your score over time.

Get credit before you need it

When it comes to establishing credit, the earlier you start, the better. It takes time to establish credit, and even longer to build a good score. Additionally, the average age of your accounts is a major factor in your score – the longer you’ve held accounts in good standing, the more creditworthy you can appear to lenders.

“Don’t wait until the very moment you need credit,” says Kristy Kim, CEO of TomoCredit. Kim came to the United States from South Korea without any knowledge of the credit system. She avoided debt and credit cards, thinking it was a good strategy. When the time came and she needed a car loan, she struggled to find a lender who would give her a chance.

“There’s nothing wrong with starting early,” Kim says, although the system can seem daunting. “Just do what you can and start as soon as possible.”

Kelly echoes that sentiment. “You want to build credit in your own name no matter what. And you want to build it when you don’t need it.

Use your card for your everyday purchases

Credit card debt is expensive — with a Average variable APR around 16%even a small balance can quickly become long-term debt.

Fortunately, credit card debt is easy to avoid: don’t make purchases you can’t afford or wouldn’t make if all you had was a debit card in your wallet.

“Use [your credit card] for the things you already have to buy,” Kelly says. “I know I have to pay for my cell phone, so might as well link it to a credit card… We know that we have to put gas in our car, as expensive as it is. But if you put it on the credit card, you use your credit. You show that you know how to use credit.

Always pay on time

The golden rule of responsible credit card use is to never miss a due date.

Payment history is the most influential factor on your credit score. And once a late payment is reported to the credit bureaus, it can stay on your credit reports for up to seven years.

To make sure you always pay on time, consider setting up automatic payment by connecting a bank account to your online credit account. If you prefer to track manually, set a reminder or memorize your payment due date and remember to pay at least the minimum payment each month by that date.

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