Canadians Are $1.8 Trillion in Debt…But Here's the Good News
Debt levels are now at a record high, but it looks like things are going to be looking up for Canadians.
Credit ratings do vary on average but when you study the data, you will soon see that the majority of Canadians are now able to manage their debt very well.
71% of Canadians have either a good or excellent credit rating.
Equifax have supplied recent data and this supports the fact that Canadians might be in debt, but they are able to manage their finances better than ever before.
Striving for the Best Rates
If you want to strive for the best rates then you need to make sure that you are in the range of very good, or excellent.
If you fall below this and are in the “good” category then this may work, but you might see some degree of impact.
You may be paying higher interest rates when compared to those who have very good credit scores, or you may find that you need to put a bigger down payment if you apply for a mortgage.
It’s also possible that you might have to get someone to co-sign your loan, or that you may be denied credit altogether.
Equifax, along with the TransUnion are in the business of making sure that they know how well people are managing their payments, before synthesising this information into a score.
This helps lenders to know how big of a risk you are in terms of credit.
Equifax has a risk score, which ranges from 300 to 900. 760 or higher is considered to be excellent.
In Quebec, the average is 750 and in British Columbia, it’s 743.
In Saskatchewan or Alberta, it’s 728.
Strong scores across the country speak to the duality of debt.
The ratio of debt to net income has been rising for quite some time and it now stands at 167.3%.
This puts the economy in a vulnerable position.
Even with this level of risk, it looks like the default rates on mortgages are very low.
Credit ratings also reflect the minuscule rate at which people default.
Low Interest Rates
Low interest rates have really encouraged borrowing and they have also made debts way more manageable too.
Rates are stable for now, but it is a known fact that eventually, they will rise.
A modest increase of half a percent wouldn’t lead to a change in debt repayments or credit scores.
Rising unemployment however could pose as a bigger risk to the economy.
Seven out of Ten Canadians Have Good Credit Scores
Seven out of ten Canadians are able to rank “very good” or above on the Equifax scale and this shows an incredible amount of responsible behaviour when it comes to payments.
Even though all of this is very good news, it’s important to remember that some are still in debt and don’t see a way out.
If you think that you are one of them then Bankruptcy Canada can help.