First National Financial LP

Residential Market Commentary - Credit scores rise: good news and bad news

  • First National Financial LP

Throughout the coronavirus pandemic, its restrictions, and its lockdowns we have heard that our economy has been resilient and there will be a good recovery with little or no, permanent damage. 

The latest report from credit monitoring service Equifax tends to support this, on the consumer side, but it suggests lingering problems for businesses.

“Data suggests that tough times will continue for small to medium sized enterprises,” said Rebecca Oakes, AVP Advanced Analytics for Equifax Canada.

“As with consumer credit, lower usage has led to commercial (credit) scores increasing slightly across Canada, but this isn’t necessarily a good thing. Businesses leverage commercial credit with suppliers as part of their day-to-day operations and therefore lower activity can indicate some early stress. Small businesses need to be spending money to be making money, and right now, they’re just not spending,” Oakes said.

Of course, business spending, growth and hiring are important to the overall economy.

Based on credit card use, the Equifax report says, consumers appear to be returning to normal but with better credit ratings and smaller, revolving balances.  When credit card use plunged in the early days of the pandemic, consumers apparently used the lull to pay down their debt and get their payments back in order.

According to Equifax, 700,000 people moved from being behind on payments, to being up-to-date outstripping the 600,000 who started to miss payments in 2020.  Twenty-six percent more consumers are carrying lower revolving balances in 2021.