Is the pain of the K-shape economy bleeding into the middle class?

Canada's middle class appears to be struggling, with new data showing more are taking on debt as financial pain bleeds out into broader sections of the economy.

Canada’s middle class appears to be struggling with the higher cost of living, with new data showing more are taking on debt as financial pain bleeds out into broader sections of the economy.

It comes as the so-called “K-shape” economy continues to underscore a widening wealth divide between Canada’s highest and lowest income groups, with Equifax reporting debt among Canadians with higher credit scores is rising.

“There’s more of a divergence happening and a few of the higher income or low-risk people are kind of switching almost on that ‘K’,” says Rebecca Oakes, vice-president of analytics at Equifax Canada.

“Everything that’s happening right now is just going to add pressure to an already difficult situation where we did have diversions in financial health.”

Total Canadian consumer debt in the fourth quarter, or final three months of 2025, increased 3.13 per cent from a year earlier to $2.65 trillion, and non-mortgage debt increased by 4.5 per cent.

Those with higher credit scores of between 751 and 880 out of the scale to 900 saw their non-mortgage debt rise by 6.1 per cent, while lower credit scores of 320 to 580 remained mostly the same, the report showed.

“It doesn’t really matter what your credit score is. What matters is how much income you have relative to your expenses. And so if your expenses are growing faster than your income, a 750 or 800 FICO score isn’t going to make you any wealthier,” says mortgage expert Clay Jarvis at NerdWallet Canada.

“So if anything, I would say having a higher credit score may have actually hurt some of these homeowners by allowing them to squeeze into these giant mortgages at a time when everything else is becoming more expensive.”