Canadian household debt climbed to a record $2.6 trillion at the end of 2025, according to a fourth quarter report released by TransUnion Canada on Wednesday.
The majority of the debt comes from mortgages, which are typically more stable and held by less risky borrowers, said Matt Fabian, director of financial services research and consulting at TransUnion Canada.
“Generally, the bulk of consumers in Canada that have credit are pretty resilient. They’ve been through a lot and they’ve been able to continue to make payments, but there is a small group that’s still struggling to keep up,” Fabian said.
The report noted total consumer debt rose more than four per cent year-over-year, even as the number of credit-active Canadians — those with at least one credit product — grew by just over one per cent.
Taken together, the figures indicate consumers might be using credit as a financial management tool, which could point to a “healthier, expanding economy rather than elevated financial stress,” TransUnion said in a statement accompanying the report.
The data also showed broad stability in consumers’ credit profiles. Nearly one in five Canadians improved their credit standing over the past year, about two-thirds stayed in the same category, while 14 per cent slipped into a lower tier.
“We’re starting to see a shift in consumer behaviour and we’re also seeing healthier behaviour, where consumers migrate into a better risk score slowly as they’re kind of coming off this stress,” Fabian said, referring to a period of high inflation and interest rates.
More than 70 per cent of credit-active Canadians are now considered “prime” or better, meaning lenders view them as relatively low risk based on repayment history and other factors. The strongest growth occurred in the “super prime” segment — the lowest-risk category — which expanded to approximately 42 per cent of borrowers.
Super prime consumers also account for the largest share of outstanding balances, growing by $162 billion in the last two years to $1.41 trillion.
While subprime borrowers hold a relatively small portion of overall balances at five per cent, their debt grew at the fastest pace over the past year, rising by nearly nine per cent year-over-year.
That acceleration suggests some financially vulnerable households may be relying more heavily on credit, Fabian said.
“For lenders, this poses a dual challenge: supporting responsible growth among lower-risk consumers, while addressing the risk of growing credit exposure for subprime households,” he said.
The report concluded that stabilizing delinquency trends, improving credit migration and strong performance among prime borrowers position Canada’s credit market for cautious growth in 2026, provided economic conditions continue to normalize.
Insolvency trustee Doug Hoyes is cautious about using credit standings as a stability indicator.
“If you have 10 credit cards and you make the minimum payments every month on all of them, your credit score will be decent,” Hoyes explained. “I’ve had people come in who are going bankrupt and their credit score is 800. It happens all the time actually.”
Hoyes said with the increased household debt, a larger crisis could be looming on the horizon that could hit renters, young adults and lower income households the hardest.
“What we are seeing is the financial stress being stored. It’s being deferred. It’s not being solved,” he said.
“Once the ability to continue borrowing gets trimmed, I think that’s a problem,” Hoyes added, explaining that lending has helped keep consumer spending resilient and hold off a more extreme recession.
