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International Women's Day on March 8 is a chance to look back on women's achievements and contributions to society, and also reflect on how much has changed. In the past 50 years, women have come a long way when it comes to credit and finances.
October 2019 marks the 45th anniversary of the Equal Credit Opportunity Act (ECOA), legislation that took the issue of inequality head on and made it illegal to base lending decisions on gender and marital status. The law was first enacted in 1974, then in 1976, other classes that had experienced lending discrimination were added to the ECOA, including race, national origin, age, use of public assistance, and exercising one's rights under certain consumer protection laws.
Lending Decisions for Women Before the ECOA
Before the ECOA, mortgage lenders often discounted the incomes of employed married women within childbearing age, assuming that they would take time off work to raise children.
Single women experienced inequity too. Proponents of the ECOA claimed that mortgage lenders were more likely to deny credit to single women relative to other applicants. According to Smithsonian.com, banks often required single, divorced or widowed women to bring a man along with them to cosign for a credit card.
These are just a few examples of the challenges women encountered when applying for credit in their name alone.
Equal Terms for Credit
Coming at a time when both single and married women were plagued by discrimination, the ECOA marked a crucial first step in helping American women gain financial independence by giving them the right to obtain credit on their own, without the backing of a cosigner. The law also ensured that when credit was granted, the terms—such as the interest rate or required down payment—were equal to other applicants with a similar credit profile.
The ECOA created a level playing field in the credit world for women. Under the protection of the law, decisions about lending cannot be not influenced by subjective speculation about a woman's earning potential or childbearing schedule. All who apply are considered by the same set of rules, using objective data, such as income, credit scores and existing debt load.
Women and Credit Today
According to an Allianz Life study from 2017, some 51% of women call themselves the CFO of their household, a dramatic change from 1974, when women were generally not involved in household finances such as paying monthly bills.
Having some control of personal and family finances is important for all women—married or single—to help establish their own credit identities. By maintaining solid credit history and good credit scores, credit-savvy women can show lenders they are financially responsible and are good credit risks. This can be especially important when life situations change.
Nobody gets married intending to get divorced, but the reality is it happens for hundreds of thousands of couples each year. While the statistics vary, somewhere between 25% and 50% of marriages will end in divorce. Without a credit history, women who experience changes in their marital status can have problems getting credit at a time when access might be critical to help them through the transition.
Death of a Spouse
If your partner dies, sustaining your credit can be challenging, especially if all the credit was held in your spouse's name. Having credit in your own name from an early age will help you weather difficult times with less financial hardship.
Remember, in community property states, credit accounts opened during marriage are automatically held jointly. That means you are still responsible for any debt that your deceased spouse incurred, so continue to make those payments or your credit score will be negatively affected. States with community property laws are Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington and Wisconsin. Alaska is an "opt-in" community property state, in which spouses may agree to be jointly responsible for all debts.
A Woman's Guide to Establishing and Maintaining Credit
Whether you are a married or single woman, follow the steps below to establish or maintain credit in your name.
1. Know your own credit profile.
- Your credit report lists all the financial accounts you have, including credit cards, loans and your mortgage if you have one. If you have accounts with your partner, those accounts will be listed as joint accounts.
- Your credit score is a numerical value which typically ranges from 300 to 850 (at Experian you will receive a FICO® Score* 8). The higher the number, the better your credit.
- Your credit scores are calculated based on information from your credit report, so understanding your report can give you the specifics on how you are doing with paying your bills and managing your credit.
2. Set some credit-building goals.
- If your credit score is not where you want it to be now, don't worry. You can take steps to improve your credit.
- A new program offered by Experian called Experian Boost™† will be available soon, and it allows you to get credit for the bills you are already paying, such as your utility and cell phone bills.
- Do you need a credit card? You may need to improve your credit score or get a secured credit card to start.
3. Follow the golden rules of credit.
- Always pay your bill on time every month, even if you sometimes can only pay the minimum. Paying your bills on time is the most important thing you can do to improve your credit scores.
- Don't max out your credit. Ideally, keep your credit card spending below 30% of your credit limit to keep your credit utilization ratio low.
- Don't apply for too much credit at once, only apply for the credit you need, and be sure you can afford to pay it off.
Celebrate Credit Equality
On International Women's Day, as women around the world celebrate big achievements of women collectively, pay homage to the lawmakers from 1974 who passed the ECOA to bring equal credit opportunities to all U.S. women. The result has brought women opportunities for financial independence and equal consideration for credit.
Editorial Disclaimer: Opinions expressed here are author's alone, not those of any bank, credit card issuer or other company, and have not been reviewed, approved or otherwise endorsed by any of these entities. All information, including rates and fees, are accurate as of the date of publication.
*Credit score calculated based on FICO® Score 8 model. Your lender or insurer may use a different FICO® Score than FICO® Score 8, or another type of credit score altogether. Learn more.