by Sophie Ma and Joie Kim, Miss CEO 2020–2021 Ambassadors
Back in mid-October, Miss CEO held an inspiring and informative workshop with Vrinda Gupta, the Founder and CEO of Sequin Capital. Vrinda launched Sequin — the first credit card on a mission to address gender inequality in credit — alongside Visa and IDEO after she was rejected for a credit card she personally helped build. All her years of smart budgeting and app payments didn’t show up in her credit history. To these large banks, she was seen as unqualified despite her experiences developing the very card she was rejected from.
But now, Vrinda is running Sequin with the goal of empowering women with credit knowledge and confidence. She hopes that her company will help educate and empower women to take charge of their financial freedom and future. Sequin is supported by angel investors at the forefront of financial services, technology, venture, and design, over 90% of whom identify as women. Vrinda also holds an M.B.A from Berkeley Haas and a B.A. from the University of California Los-Angeles. Learn more about what Vrinda had to say about credit inequality and how to deal with financial obstacles young women face on the daily.
What is credit?
It’s a simple word but holds so much meaning in an adult’s life. Vrinda describes credit as the ‘most important grade’ one could receive after graduation. In other words, credit is what determines whether you can get a loan for the house or car you want to purchase. It’s the level of trust that a bank can hold in you depending on your past financial performance.
How is credit determined?
Credit is determined based on one’s payment history, utilization of credit limit, age of credit, recent hard inquiries, and the variation of credit one has. If one makes sure to pay bills off on time, wisely uses their given credit, has a steady time period of credit, limits the amount of loans inquired for, and holds a diverse variation of credit cards, they have the ability to empower oneself financially. Of these concepts, the three most important ones are to pay on time, keep utilization low, and have long-standing credit. These three factors alone account for 80% of your credit!
Credit bureaus
Credit bureaus, the three biggest being Equifax, Experian, and Transunion, collect credit information for each and every adult. When one needs to take out a loan in order to purchase a house, a car, a phone plan, or something similar, lenders check with credit bureaus to determine whether someone is trustworthy enough to provide a loan to. Having a low credit score means that one may be denied the chance to buy a house, purchase a needed vehicle, or take out other loans for personal reasons.
The inequalities women face in credit
According to Vrinda, the systems and structures we live in are clearly costing women more. Unfortunately, women are 5% more likely than men to carry a balance, 4% more likely make only the minimum payment, and 6% more likely to be charged a late fee. It is clear that our society has not provided sufficient education to women on financial literacy, which shapes confidence and attitude towards credit and personal finance. Data shows that women experience more anxiety around the topic of finance. Women believe their credit scores to be lower than the average male, though the opposite is often true. Moreover, society continues to leave generations upon generations of young women lacking financial knowledge.
How can I improve my credit?
Does the prospect of low credit and financial illiteracy scare you? Educating yourself is the first step to achieving a healthy credit score. Here are some tips to improve credit and increase financial stability:
- Pay your credit card bills on time. Setting up an auto-pay system can help so you don’t forget! Always pay off your highest interest credit card bills as soon as you can, before any other interest.
- Keep your credit utilization low. ‘Credit utilization’ is a term which describes how much credit you have used, divided by the amount of credit you currently have. Credit utilization should be at less than 30% at all times and 10% if possible. For example, if banks give you a credit card with $10,000, aim to spend $3000 or less. Otherwise, banks may begin to lose trust in whether you can pay them back. Paying off your credit multiple times a month can also help with utilization. This way, if you make a purchase that takes up more than 30% of your credit, paying things off right away can help increase the bank’s trust in you.
- Age of credit is important for a high score as well, so start building your own credit early as soon as you turn 18. Keep your oldest card alive! Don’t close it off, and use it at least once every 6 months as this will help your overall credit score.
- Have a visible credit card under your own name. Never rely on authorized user accounts built on your parents’ or spouse’s card as this does not count as your own credit. A good option is to start with a secured card, then transition to an issued line of credit afterwards.
- Build your knowledge on how credit works. The knowledge gap between men’s credit and women’s credit narrows when women are better educated and have access to information regarding credit. Consistently making an effort to learn about your credit is essential to having successful finance records.
- Don’t carry a balance (if possible). The interest that you will pay when you carry a balance, which is money you owe your bank, increases your chance of retaining bad credit. If you are carrying a balance, you are paying extra interest every day that it is borrowed over the payment due date. Note that credit reporting bureaus look at whether you pay the full balance (as opposed to the minimum payment) on your statement on time each month. Take a look at your last three credit card statements (if you possess a credit card). Ask yourself these questions: Did you pay the balance in full every month? Were you charged any fees?
- Check your credit report often and address errors with credit bureaus. Studies show that women pull their credit reports less often than men, however, that needs to change. You can check your credit for free three times a year — once each with Experian, Equifax, and Transunion. If you see any fraudulent errors, contact your bank right away and oftentimes your credit will shoot up.
- Start thinking about how to build credit well in advance of when you will need it. When you apply for any loan (credit card, student loan, mortgage), one of the first steps a lender will take is to check your credit score. If you have a low credit score or are credit invisible (meaning there is no record of credit attached to your name), it will either be more expensive for you to borrow, and interest on the same credit card may cost you more than it would for others.
Credit may seem like a frightening topic at first, but Vrinda and Sequin Financial are determined to demystify the process for women of all ages. The bottom line is to build credit early, responsibly, and consistently. With education comes empowerment, and together, we can all become the Miss CEOs of our lives.
Have further questions for Vrinda or want to check out Sequin? Contact her here:
Website: www.sequincard.com
Instagram: sequin_card
Email: vrinda@sequincard.com
