Forget the Wage Gap. Let's Talk About the Borrowing Gap

Woman using computer in an office with skeptical look on her face.

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Men are generally able to borrow more money than women. Talk about a glaring disadvantage.


Key points

  • Women have long earned less money than men.
  • Now, data reveals that women get less leeway to borrow money as well.

You may be familiar with the gender pay cap, which speaks to the fact that women earn less money than men even within the context of similar roles, industries, and qualifications. In fact, the Pew Research Center says that last year, women earned only 84% of what men brought home. Or, to put it another way, it would take the typical female worker an additional 42 days to make the same amount of money as a man in a similar role.

But now, new data reveals another point of disparity -- the borrowing gap.

Men get more leeway with lenders

Research from the Federal Reserve Bank of Philadelphia shows that men don't just earn more money than women. They're also able to borrow more.

In fact, male borrowers have, on average, credit limits that are $1,323 higher than what females have. That data accounts for factors that go into establishing borrowing limits, like income and credit scores. In other words, among men and women with similar incomes and credit, men still get more leeway to borrow.

On the one hand, a $1,323 difference in borrowing power is relatively small, especially given that women only earn $0.84 for every dollar earned by men. At the same time, this is yet another example of how women seem to be at a glaring financial disadvantage.

How to improve your borrowing options

No matter what gender you identify as, there are steps you can take to open the door to more borrowing possibilities. The first and perhaps most important is to focus on building a strong credit score. That means paying all bills on time, keeping long-standing accounts open, maintaining a healthy mix of debts, and not applying for too many loans or credit cards at once.

Keeping your credit card debt to a minimum can also help your credit score improve. That's because credit utilization ratios play a significant role in determining credit scores. Those ratios measure how much credit a borrower is using at once.

Next, it pays to work on boosting your income if you're looking to increase your borrowing options. You can do so in a few ways. First, know what you're worth. The salary you earn isn't necessarily reflective of what you should be getting paid for the work you do.

Research salary data for your role, industry, and geographic area (sites like Glassdoor are a good resource). If you find the average person with your job title in your city makes $70,000 a year and you're only being paid $64,000, that alone could make the case for a raise.

Secondly, consider getting a side job on top of your main one. That additional income will count when lenders review a loan application.

It's unfortunate that women have long been underpaid compared to men. Now, it looks like a borrowing gap exists as well, minimal as it may be. That's not the best of news, but it's also, unfortunately, not all that surprising.

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