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Credit Scores Are Gender-Neutral, So How Can the New Apple Card Have Something Against Women?

Jean Chatzky  |  November 12, 2019

The credit approval process is supposed to be gender-neutral. But allegations by Apple Card applicants show that gender bias in the credit approval process may be alive and well — still.

1974. That year — 45 years ago — marked the passage of the Equal Credit Opportunity Act, which allowed women to get credit cards on their own without the signature of a male co-signer. Yet in 2012, some 40 years later, FINRA found that regardless of levels of financial literacy, women were being charged credit card interest rates that were half a percentage point higher than men. 

It’s still happening, folks. Today, in 2019, it seems that Apple and Goldman Sachs, the issuer of its credit card, may also be stacking the cards — the new Apple Card — against women, too. Financial regulators are investigating whether the new card discriminates against women after complaints (including one from Apple co-founder Steve Wozniak) that some women are being issued much less credit than their husbands

The credit approval process is highly automated. So are we seeing — and being subject to — the results of a discriminatory algorithm? 

What’s in a credit score … and what’s not supposed to be

The algorithm lenders use to deny or approve credit applications and set spending limits is supposed to, by law, be gender-neutral. The formula is based on your credit score, which is derived from the information three major credit reporting agencies — Experian, Equifax and TransUnion — collect about you from financial institutions and public records. (You can access these credit reports once a year at no charge at annualcreditreport.com.)  

The credit bureaus generally use a standardized credit scoring system created by the Fair Isaac Corp. (FICO), which is why the scores provided by these bureaus are referred to as “FICO scores.” (P.S.: FICO is just one of the many credit scores you have.) 

Here, straight from FICO, is how your credit score is (supposed to be):

  • 35% of your score is based on your payment history. Pay your bills on time, and you’ll nail this critical part of the equation.
  • 30% of your FICO is based on how much you owe. It’s not merely about the dollar amount, but how much of your available credit you’re using. This is why maxing out your cards hurts your credit reputation (even if you pay it off in full each month).
  • 15% of your score is determined by the length of your credit history — or how long you have been using credit, including the average age of all your accounts and how long it has been since you used certain lines of credit. (Don’t close that old credit card until you answer these four questions!)
  • 10% is derived from the mix of credit you use, such as credit cards, installment loans, mortgage loans and retail cards. There’s no need to set up loans in each category to get a high score.
  • 10% is based on new credit, meaning how recently and frequently you’ve applied for a new loan. 

Notice anything missing from that list? There are a lot of factors that U.S. law prohibits credit scoring companies from considering when scoring your creditworthiness, including race, color, religion, national origin, marital status and (ahem) gender. 

Other off-limits data points: Your age, income (including your salary, occupation, title and employer), where you live, what interest rate you’re being charged on any of your accounts, and any child/family support obligations.

So, what’s up Apple? We’ll keep you posted as the investigation continues. But in the meantime, can we hear a collective ugh!?

Speaking of credit …

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