Bank of Canada Governor Mark Carney and Finance Minister Jim Flaherty will have something to smile about after Equifax released some new stats that shows Canadians aren’t defaulting as much on their loans as they were at the end of the global financial crisis. And while our household debt still remains very high, the new figures do show that we might be getting better at handling that debt.
The stats show that the number of Canadians that are likely to default on debt has fallen to 3.04% – the lowest its been since September 2010. While the stats don’t take mortgage loans, including home equity loans and home equity lines of credit into consideration, it does show that Canadians are ready to tackle their debt and start paying it off. Hopefully before those interest rates start to climb.
So how are the stats even collected? And how is anyone supposed to know who is going to default on their debt in the future? When compiling the data, figures for the amount of Canadians who have missed three or more consecutive debt payments are looked at. It’s then estimated that about 40% – 50% of these individuals will default on their payments. With the current figure being down to 3.04%, that’s 738,526 Canadians who are likely to default on their non-mortgage loans.
For those who do find themselves in trouble and need to fix their credit, Wendy Dupuis of the Financial Fitness Centre in Windsor gave a few pointers, “Making sure that you’re making whatever payments you have on credit on time is absolutely key,” she says. “Try to live on cash and make sure that bad stuff falls off your record over time. The other thing you don’t want is to just go out and get a whole bunch of credit and run the danger of getting back into the same mess.”
Bad credit, brought on with the defaulting of payments, can be disastrous for anyone and can wreck their chances of more than just ever being approved for a mortgage. Property insurers will charge higher fees for those that have bad credit, and it can even keep Canadians from getting a home or a job, as more landlords and employers are starting to take credit history into consideration as well.
It’s a problem for many people, but it’s one that can be solved fairly easily and, Dupuis says, for many, bad credit is something that can be fixed in as little as six months to a year. Compare that with the seven years it takes to get a bankruptcy off your report, and rebuilding certainly seems worth the time and effort.
