The number of Canadians who are late on making their monthly credit payments has swollen to more than half a million, according to a new report by Equifax Canada.
The credit company says that the national delinquency rate on credit payments continues to rise as the recession hits communities across the country.
Over a one-year period ending May 31 of this year, the number of delinquent credit accounts jumped by an average of about 19 per cent.
The credit bureau called the double-digit jump "alarming," noting the national delinquency rate -- payments overdue by at least 90 days -- hit 1.52 per cent at the end of May.
Much of the trouble stemmed from missed payments on credit card bills and for store financed purchases of items such as furniture and electronics.
"On a yearly basis, the average delinquency rates have been rising dramatically in Alberta (26 per cent) and British Columbia (27 per cent), and, on the east coast, Prince Edward Island experienced a 26 per cent increase.
Laurie Campbell, executive director of Credit Canada, an organization that provides money management and credit management counseling, said in an interview with CTV New Channel that she is not surprised by this report.
"Sure, we are in a recession, so it impacts peoples' ability to pay, but the problem goes much deeper than that," Campbell said. "Canadians have been carrying far too much debt now for many years and this is just starting to tip over the edge."
Campbell says one of the biggest problems is an increase in impulse purchases on credit cards, coupled with a decline in the average Canadian savings.
"Savings have gone down to almost one per cent now, as opposed to 10 per cent in 1990," she said. "People don't have a cushion of savings in difficult times. The new emergency fund has become credit cards."
The good news is Campbell has a few suggestions to help people get on track.
For starters, get rid of the debt on high interest cards first, while maintaining regular payments other credit cards.
"It's not a short term solution. It takes a long time to get in debt and it will take a long time to get out of debt," Campbell said.
She said consolidating your debts to get a lower interest rate will help, even by putting your debt on your mortgage at a much lower rate.
"If you are having trouble with your debts, call your creditor before you get into arrears. Don't call them three months into your delinquency. Ask them for 30 days to get your finances in order, then if you still can't pay, call them again," said Campbell.
Nadim Abdo, an Equifax vice-president, said the rising delinquency in areas such as credit cards are troubling because consumers tend to miss payments on those unsecured credit products before they fail to pay back collateral-backed loans such as mortgages, bank loans and lines of credit.
Consumers who skip payments suffer longer-term consequences because of tarnished credit scores.
"When economic conditions get better, whenever that is, if they want to go get a mortgage or get a line of credit - with a negative rating on their credit file, that's not going to help them," Abdo said.
With files from Canadian Press
