Canadian debt has hit a crushing $2.6 trillion and it’s threatening your financial freedom, but you can protect your future by monitoring revolving credit now

At the same time, nearly one in five Canadians improved their credit standing over the past year, while serious mortgage delinquency rates remained near historic lows.

“The improvement reflects a stabilizing economic environment,” said Matt Fabian, director of Financial Services Research and Consulting at TransUnion Canada, in an interview with Money.ca. “As inflation cooled and interest rates stopped rising, financial pressure eased, especially for vulnerable households, helping stabilize delinquency rates.”

Record debt concentrated among stronger borrowers

Of the $2.6 trillion in total household debt, roughly $1.9 trillion is mortgage-related. Mortgage balances tend to be held by prime and super-prime borrowers — consumers with stronger repayment histories and lower default risk. According to the report, in Q4 2025 more than 71% of credit-active Canadians fell into prime or better risk tiers, and those borrowers account for more than 80% of outstanding balances.

“Borrowing growth is concentrated among existing credit users and largely reflects healthier expansion among stronger borrowers, rather than a broad increase in reliance on credit,” Fabian said.

He noted that wage growth and rising household wealth have helped support balance sheets, while many homeowners continue building equity despite elevated borrowing costs.

Still, not all segments are expanding from a position of strength. Subprime borrowers, who represent about 10% of credit users, saw balances grow 8.9% year-over-year. This was the fastest increase among all risk tiers, even though they account for just 5% of total debt.

That divergence underscores the fact that overall, debt stress has narrowed rather than spread.

Credit score gains show resilience

TransUnion’s report shows 19.4% of Canadians migrated into a better risk tier over the past year, while 14.4% moved downward. Two-thirds remained in the same tier.

Fabian noted the migration pattern reflects normalization following several years of elevated inflation and rising interest rates.

“Prime and super-prime consumers were better positioned to translate stronger repayment performance into credit score gains,” he said.

At the same time, 5.2% of consumers fell from prime or above into near-prime or subprime categories — a shift that suggests financial pressure persists at the margins.

“The fact that only about five per cent fell out of prime suggests the weakness isn’t broad,” Fabian said. “But it does point to ongoing stress among more vulnerable borrowers.”

For households feeling the strain, Fabian notes that “early warning signs to watch include rising reliance on revolving credit, persistently high utilization, and missed payments in unsecured products like installment loans — areas where recovery tends to lag even as the broader economy improves.”

Delinquencies plateau — except in unsecured lending

After climbing sharply between 2021 and 2023 amid inflation and interest rate hikes, serious delinquency rates have largely stabilized.

The national consumer delinquency rate (90+ days past due) held steady at 1.83% year-over-year in Q4 2025. Mortgage delinquency remains particularly low, edging up just three basis points to 0.29%.

Auto loan delinquency improved for the first time in four years, declining to 0.90%.

The notable exception was installment loans, where serious delinquency rose to 2.68% year-over-year.

“Installment loan delinquencies stand out because that segment grew rapidly among subprime borrowers during the high-inflation period,” Fabian said. “Importantly, this stress is largely contained to this higher-risk segment and does not signal broader credit deterioration.”

In other words, while unsecured personal lending remains under pressure, the data does not currently point to systemic weakness across major credit products.

What elevated debt levels mean for seniors

For Canadians nearing retirement or living on fixed incomes, the $2.6 trillion headline may sound alarming. But Fabian emphasized the importance of looking beyond the aggregate number.