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Women & Credit: A History You Should Know

, by Caryn Ryan

Did you know that before 1974, women in the United States had little access to credit?  For Women's History Month, we take a look back...

My mother, as a young woman in the 1960s, bought a typewriter on installment. Her goal was twofold: to get a typewriter to do her schoolwork, but also to build her credit history.

Believe it or not, more than forty years ago, this was one of the few ways that an unmarried woman like my mother could get access to credit at all.  Most lenders and credit card companies wouldn't consider women applicants without a male cosigner. If lenders granted any credit to women, when deciding how much to grant, they would discount a woman's income by as much as 50% as compared to a man's.  And even if a woman was able to establish credit on her own, her individual history would essentially cease to exist in the event of her marriage.

My mother did eventually marry (spoiler alert, she married my father). But before that, she used her credit history to rent an apartment in San Francisco.  And the typewriter? She used it to finish her senior project and complete her degree.

A few years later, the Equal Credit Opportunity Act of 1974 (ECOA) finally made it illegal for lenders to discriminate against applicants on the basis of sex, marital status, race, color, age, religion, or national origin. Today, women may think nothing of having access to fair credit, but with March being Women's History Month, it's a great time for us to take stock of how far we've come within the last fifty years.  Let's explore the history of Equal Credit, what it means for FICO® Scores, and what that means for you.

FICO® Scores & Equal Credit Opportunity

The Equal Credit Opportunity Act not only allowed for individuals to have access to services that were previously denied them. It also served to regulate what financial data could be collected and used for lending purposes.  The widespread adoption of credit scoring in general and FICO® Scores, in particular, enabled measurement of creditworthiness fairly without relying on the biases that had previously influenced the financial industry. Credit scores, particularly the industry-standard FICO® Scores used in the vast majority of lending decisions, have made credit fairer, quicker, and more efficient by focusing less on who the applicant is and more on how that person behaves in relation to credit.

What's In Your FICO® Score (And What's Not)

So, while you might occasionally read articles on comparing credit scores by different groups—for instance by region or men vs women—it's important to know what actually is and isn't considered by FICO® Scores.

First, what is NOT in FICO® Scores? FICO Scores do n't  consider sex, race, ethnicity, marital status, or religion, or anything else that is banned by the ECOA.  Additionally, FICO Scores don't include your income, where you live, or any rates currently being charged to your accounts.

Next, what IS in FICO® Scores? FICO Scores contain both positive and negative information from credit reports, focusing on five main categories of information.  These five categories include how consistently bills have been paid, how much is owed, length of credit history, types of credit, and how much new credit has been sought.

Continuing the Progress... for Everyone!

From the score breakdown we discussed above, we can take away a few quick guidelines on good credit practices.  These guidelines work for everyone, regardless of gender or background:

  1. Pay your bills on time

  2. Keep balances low as compared to your total available credit

  3. Avoid account "churn" - avoid closing old accounts and opening new accounts frequently

  4. Review your credit regularly for errors, fraud, or identity theft

Credit is a hard-won benefit - one that can open up a lot of opportunities, from pursuing an education to securing employment.  Managing it is a skill, one that can become much easier with the right information.

Caryn Ryan

Caryn Ryan is a FICO employee with 10+ years' experience in the financial services industry. She is a graduate of UC Santa Cruz and London School of Economics.