While the pandemic has caused significant collateral damage in the way of job losses and business closures, a recent report indicates credit scores have actually improved.
According to a study from Borrowell, a financial institution based in Toronto, the average credit score for Canadians increased by 18 points from 649—a below-average score—in the first quarter of 2020 to 667—a fair score—in the first quarter of 2021.
Over that same period, the average number of missed payments per consumer declined by 33 per cent from 0.300 to 0.200 per credit report—which amounts to two missed payments per 10 consumers, down from three.
In Mississauga, the average credit score rose 18 points to 690—a fair to good score—while the number of missed payments dropped 33 per cent to 0.132 per report, which amounts to 1.32 missed payments per 10 consumers.
In Brampton, the average credit score rose 20 points to 667—a fair to good score—while the number of missed payments also dropped 33 per cent to 1.83 per report, which amounts to 1.83 missed payments per 10 consumers.
In Hamilton, while the average score did rise 19 points, it only increased to a below-average score of 653. The number of missed payments once again dropped by 33 per cent to 0.205 per report, which amounts to 2 missed payments per 10 consumers—the national average.
Credit scores are made up of five components—35 per cent is based on payment history, 30 per cent is based on credit utilization, 15 per cent is based on credit history, 10 per cent is based on credit mix, and 10 per cent is based on credit inquiries.
Scores range from poor—300 to 499, poor to below average—500 to 659, fair to good—660 to 739, and excellent—740 to 900.
“It’s clear that consumers with low credit scores have experienced more difficulty over the past year than other Canadians,” Andrew Graham, co-founder and CEO of Borrowell, said in the report.
“Many Canadians have been living paycheque-to-paycheque and struggling to pay rent. These consumers are having an extremely difficult time staying afloat financially and improving their credit health, even with the various financial relief measures introduced in the past year,” he continued.