Canadian Household Credit Health Has Only Partially Recovered: TransUnion

Canadians aren’t defaulting, but that’s the only thing healthy about household credit. TransUnion (TU) released their Credit Industry Indicator (CII) this month. The index gauges the overall health of consumer credit using various factors. Despite a booming mortgage market, credit health is still far from pre-pandemic levels. It only made minor improvements since the biggest deterioration in quality on record.

Credit Industry Indicator (CII)

The Credit Industry Indicator (CII) is a new measure of credit health for consumer credit. It’s used to give the industry a broad view of how well supplied and utilized consumer credit is. The indicator draws on four key areas for insights — demand, supply, consumer behavior, and performance. It’s a much more comprehensive look at credit health compared to looking at just rates of growth.

Canadian Consumer Credit Health Deteriorated Very Quickly During The Pandemic

The CII made a sharp decline after the outbreak of the pandemic and has barely recovered. From February to August in 2020, the index fell from 101 to 84 percent, a decline of 17 points. A drop in credit demand was largely behind the move. A lack of credit supply for some products was also a drag, according to the agency.

Canadian Credit Industry Indicator (CII)

The indexed health score for Canadian consumer credit. Higher numbers mean better quality credit markets. 

Source: TransUnion. 

Household Credit Health Is Improving, But Not Even Close To Pre-Pandemic Levels

TransUnion said they observed a (very!) mild improvement for the CII. In April 2021, the index climbed 2 points from the low reached in August 2020. Improvements were attributed almost entirely to performance. It’s near impossible to default these days, so it’s not too much of a surprise. Lenders are trying to provide every possible option to avoid being stiffed.

The lack of credit supply and credit demand is, once again, the reason it’s failing to move. We’re going to assume they mean other than mortgages.

Canadian consumer credit is seeing small improvements in health, but has a long way to go. Compared to pre-pandemic levels, the CII  barely shows a recovery. This may surprise some, since mortgage debt is near a decade high for growth. It appears that’s the only thing people are borrowing for. Previously released TU data shows other segments are showing a lack of growth. 

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