A recent survey conducted by Equifax Canada shows that people are more concerned about their financial future.
When Canadians were asked to reflect on COVID-19 and their current financial situation, the results showed that:
- 61% of Canadians are concerned about being able to live comfortably in retirement
- 54% are concerned about their investments
- 42% reflect on paying off their debt
- 37% are worried about paying their monthly bills
- 34% of Canadians have concerns surrounding job security
- 33% worry about their credit scores and reports
- and 32% have concerns over the ending of federal support programs
“I suspect that the pandemic has been a bit of a financial wake-up call for people,” says Julie Kuzmic, Senior Compliance Office of Consumer Advocacy at Equifax Canada, “even people who are benefiting from the pandemic […] because they have been able to maintain their job and they’ve had fewer expenses […] it’s still a reminder that things don’t always go as you expect them to.”
With this in mind, Equifax Canada’s survey also showed that there has been an increase in Canadians checking their credit scores and reports, with 64% of Canadians checking their credit reports in the past year and 26% within the past month.
Equifax Canada says this is a major change, especially considering 78% of survey respondents indicated they have now checked their credit reports at least once compared to a survey conducted five years ago when 67% said they rarely checked their reports.
But despite checking their scores and reports more, in addition, the survey shows that there’s still a lot of misunderstanding about how credit scores are calculated and what information goes into a credit report.
“There hasn’t been a lot of solid information [or] a lot of sources of reliable information about credit […] and how all the pieces fit together and I think we are starting to see that,” says Kuzmic.
When presented with a series of false statements about credit scores and reports during the survey, a significant number of survey respondents of all ages agreed with the following false statements:
|% Agree it's a False Statement||% Agree it's a False Statement|
|False Statement||General Population||Adults 18-34|
|If you have a good credit score, you will always get approved for a loan||48%||49%|
|Credit bureaus decide whether or not you qualify for a loan||43%||49%|
|You have one credit score||40%||50%|
|Higher salaries result in better credit scores||22%||30%|
|Checking your own credit reports hurts your credit scores||20%||28%|
|People who avoid using credit have higher credit scores||14%||21%|
|Married people have a joint credit report||13%||21%|
|Credit reports contain RRSP balances||10%||19%|
Kuzmic highlights that there is this idea that we have one credit score – which is not the case. There are many different credit scores that are used by banks and lenders in Canada and it has always been that way.
This means that you may see different credit scores and reports from different sources, but it’s not to say that one is more correct or accurate than the other.
“One score may show 783 and another may show 825 […] it is possible because different banks use different score versions, one of them using the one where the [score] is 825, they might interpret that 825 the same way that a different bank using a different version interprets the 783,” says Kuzmic.
For people with credit scores less than about 750 out of 900, Equifax Canada says the next step should be to understand how to improve those scores over time. Lenders generally consider anyone above 750 to be a lower risk to default on their payments.
“A lot of people try to dig into the details and find ways of gaining credit score calculations and their looking for the magic bullet of what’s the one thing that I need to do in order to have that great credit score,” says Kuzmic.
But she says the answer is really quite simple – “pay your bills on time.”
Kuzmic says in the research that they’ve done, there aren’t many people who are spending their spare time researching credit information out of interest. Often when people try to understand what’s going on behind their credit score is when they are expecting a financial crisis or are in the midst of one – like the pandemic.
She says, “I think [those in financial services] need to think about how do you present the information in such a way that’s it’s useful and gets the information that the person may need at the time.”
Kuzmic says there are a number of not-for-profit financial counselling agencies across Canada serving anyone, even without a set of financial distress, in order to access free credit counselling.
“You just have to pay attention to who the agency is and make sure that they are actually an accredited credit counselling agency in Canada,” says Kuzmic.
To learn more about how credit works, consumers are encouraged to visit Equifax Canada’s education hub. The site offers insights on how different actions may affect credit scores and provides resources to help them improve their financial wellness.
**Equifax’s survey was completed between September 16-24, 2021 using Leger’s online panel. 1500 Canadians completed the survey. The margin of error for this study was =/-2.5%, 19 times out of 20.**