Q4 2022 Credit Industry Insights 

Credit Health in Canada Remains Steady Despite High Interest Rate and Inflation Environment

The Q4 2022 Credit Industry Insights Report (CIIR) showed the Canadian credit market continues to expand against an uncertain economic backdrop, with consumers taking on additional credit and lenders continuing to grow.

TransUnion’s Credit Industry Indicator (CII), which maps consumer credit market health, rose four points year-over-year (YoY) in December 2022, reaching 105 and remaining in the same range as before the COVID-19 pandemic.

90+ Day Delinquency Rate YoY Changes for All Product Loans

Consumer-level serious delinquency (90 days or more past due) increased 11 bps YoY to 1.51%. While overall delinquency levels remain below pre-pandemic levels, consumer-level delinquency has increased steadily over the last three quarters, with the most significant increases in recent months seen in unsecured credit products.


“We are observing increased credit usage, as some consumers look to credit as a means to help stave off financial pressures. Additionally there’s been some deterioration in credit performance; however; overall credit market health remains at pre-pandemic levels. Lenders are beginning to increase their provision for credit losses, but they’re not stopping their growth trajectory since delinquency levels are still below what they were prior to 2020. Canada is still in a good environment from a performance perspective, but lenders would do well to monitor trends closely.”

- Matthew Fabian, Director, Research and Industry Insights


Average Consumer Balance, by Product*

*Represents the average balance held by a consumer across each type of product (consumers can have multiple instances of same product)

More and more borrowers are looking to a range of credit products to cope with their financial pressures and better position themselves for the evolving financial landscape. Credit participation increased across all provinces, led by Ontario which saw a 3.2% increase in the number of credit-active consumers. Total outstanding balances also reached a new record high for the second consecutive quarter, increasing 6.8% year-over-year (YoY) to $2.3 trillion. Increases in average credit card and mortgage balances per consumer – up 7.2% and 4.5% YoY, respectively – largely drove this balance growth. 


Lenders can turn to early warning signals to predict and prevent delinquencies


While most efforts in portfolio management focus on optimizing collections after delinquency, lenders can focus more on borrowers in pre-delinquency states at risk of becoming delinquent, to empower consumers and prepare less costly recovery strategies. Using a robust data framework to identify at-risk consumers at an early stage, and respond with appropriate account management strategies, can help prevent delinquencies and build loyalty among customers.

To deliver the tools necessary for effective risk management, TransUnion conducted a study1 to better understand first-time defaulting consumers, and clearly distinguish distracted consumers from struggling consumers. The study found that younger, higher risk consumers with lower incomes and less credit experience have a higher probability of becoming struggling consumers. However, a portion of prime and above borrowers are also struggling, making it key for lenders to identify them.

The study also found that consumers building balances are more likely to default, making this behaviour a leading indicator of delinquent and struggling consumers. A high utilization rate is also a good indicator for predicting struggling consumers, who also tend to have less mature portfolios, with a higher share of accounts opened in the last two years. In addition, the study found that consumers who pay above the minimum payment due amount are less likely to become delinquent and struggling.



“Lenders should prioritize struggling borrowers, as their level of average balances has recently exceed pre-pandemic levels. The fact that most consumers who default for the first time become struggling borrowers is cause for concern, and is a priority for lenders to manage, particularly since pandemic-driven payment relief programs have ended as a source of liquidity for borrowers.”

- Matthew Fabian, Director, Research and Industry Insights

TransUnion’s 2022 Early Warning Signals (EWS) study defined first-time defaulters (FTD) as consumers who have defaulted (became 30+ days past due on a credit payment) for the first time over the last 24 months of their credit history, meaning they were current on all their credit payment obligations in the two years prior to their default. The study was conducted leveraging credit data between April 2019 and June 2022.

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