CMHC Confirms, Credit Scores are Improving!


Recently published data from the CMHC (Canada Mortgage and Housing Corporation) shows that Canadians in general are more sensible when it comes to financial management and ultimately their mortgage credit ratings – the average credit score is higher than it was in 2012 and is continuing to rise.

Of all mortgages in Canada, 80.7% are held by mortgage holders with a “very good” (700 – 794) or “excellent” (750+) credit scores.

Compared to 2012 (78.20%), the trend of financially sound Candadians has improved and points to the general financial strength of it’s citizens. Published within the same report is more good news – the percentage of borrowers with “fair” or “poor” credit scores is trending lower each year, with only 10.20% of all households in Canada now in this bracket (down from 11.80% five years ago).

Mortgage Holders have better credit


When comparing credit scores of different types of consumer debt (good and bad), mortgage holders tend to have better scores than other types of consumer debt – which makes sense to a large degree as a persons home is their primary need in life.

However when looking at the percentage of non-mortgage holders with fair / poor credit scores (general credit scores), there is a 3.4% increase when compared to those with a mortgage. The CMHC reported that this has been increasing since 2014 and brings into the question the mind set of consumers who are out of their mortgage and more reckless with their usage of debt.

Looking at the lower end of the market, there is a 5% difference, with 15.20% of non-mortgage consumers with a poor / fair credit score and 10.20% with mortgages.

A fair credit score is 600-659 while a poor credit rating is less than 599.

In an environment of rising interest rates this is all good news for the economy, showing clearly that consumers holding mortgages are able to make their payments in overwhelming majority (and reducing risk to the countries real estate market).

Novak Jankovic, former CMHC economist (specializing in housing markets / mortgage finance), says that this is the best news for the Canadian mortgage insurance industry as the concern for large scale defaults is minimal (which would be due in part to the current overpriced property market and rising mortgage rates).

“However, given that mortgage defaults peak five to seven years after mortgages are issued, the really important question is what was the quality of loans underwritten in the 2010”.

Other findings from the CMHC data include:


  • The only two metropolitan areas that had mortgage holders with an average credit score of “very good” or “excellent” lower than the national average were Edmonton and Calgary, at 77.4% and 79.6%, respectively.
  • The share of mortgage holders in the two lowest credit score ranges remains more elevated in the oil-rich markets of Edmonton and Calgary.
  • Delinquency rates (where payments were more than 90 days in arrears) in Q4—the most recent date for which data is available—were highest in New Brunswick (0.79%) and Nova Scotia (0.75%), and lowest in Ontario (0.19%), B.C. (0.25%) and Manitoba (0.35%).
  • Toronto and Vancouver had delinquency rates lower than the provincial averages, at (0.12%) and (0.15%), respectively.