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Whether you’re a university student trying to manage your first credit card or you’re approaching retirement and want to make sure you have a plan for a comfortable financial future, a credit counsellor can help. Credit counsellors provide financial education and services to Canadians at all different ages and stages of life. Keep reading to learn if you can benefit from credit counselling in Canada.

What Is Credit Counselling In Canada?

The purpose of credit counselling is to help you manage your debt and improve your financial situation. If you’re having a hard time creating a budget, managing your credit, or paying off debt, you might consider speaking to a credit counsellor. A credit counsellor can provide useful guidance on a variety of credit and debt-related issues. 

How Does Credit Counselling Work?

Credit counsellors can provide a variety of services, from one-on-one counselling to group sessions, and debt management plans. The type of financial issues you’re dealing with will help to inform the purpose of counselling.

For instance, if you want guidance on how to create a household budget, you might sign up for a group seminar on budgeting. If you have more significant debt issues, you may benefit from a few one-on-one sessions so a counsellor can assess your debt and help you find the appropriate strategy.

How Can A Credit Counselling Agency Help Me?

A credit counsellor can provide financial education on a variety of topics, help you deal with collection calls, or recommend a debt strategy so you can find relief. Some of the common ways a credit counselling agency can assist you include: 

Budgeting

If you find it difficult to manage your household finances, a credit counsellor can help you create a monthly budget. They can also teach you how to use it so you can stay on top of where and how you are spending your money. 

Debt Management Plan

Many credit counsellors offer debt management plans (DMP). A DMP is a form of debt consolidation. It allows you to roll up multiple debts into one monthly payment. This can help to simplify the debt repayment process. 

In a DMP, your counsellor negotiates with your creditors to reduce or eliminate the interest or fees on your debt, or to extend the time you have to repay your debts. A DMP is an informal proposal, which means, your creditors do not have to participate. If they do agree to participate, you are responsible for making one monthly payment to your credit counsellor and they will pay your creditors on your behalf.   

Before committing to a DMP, make sure you ask about the fees. Also, understand there’s a chance you could lose money if you pay for a DMP and your creditors don’t agree to participate. 

Consumer Proposal & Bankruptcy

Based on your financial situation, a credit counsellor can also recommend a more formal debt solution, including a consumer proposal or bankruptcy. However, a credit counsellor can not administer either of these services. A Licensed Insolvency Trustee (LIT) is the only professional in Canada allowed to administer a Consumer Proposal or Bankruptcy proceeding.   

Is Credit Counselling For Anyone? 

There are no specific requirements for credit counselling, it’s available to anyone who needs help managing their finances or reducing debt. However, if your debt is significant and you require a more formal debt relief solution, such as a consumer proposal or bankruptcy, a credit counsellor can not provide these services. You will have to speak with a Licensed Insolvency Trustee.

Where Can You Get Credit Counselling In Canada?

The Government of Canada recommends the following agencies when searching for a credit counsellor:1 

If you live in Quebec, you can check out the Associations coopératives d’économie familiale (ACEF), which you can find by visiting the Coalition des associations de consommateurs du Québec (CACQ).

Does It Cost Money To Use Credit Counselling Services In Canada?

There are both not-for-profit and for-profit credit counsellors. Fees will vary depending on the credit counsellor you choose. When working with a not-for-profit counsellor, services are typically provided at no or low cost. Often, if you can’t afford to pay, the company may still provide services at no cost. The only reason not-for-profit counsellors may charge a fee is to help cover costs, not to make a profit.  

If you choose to work with a  for-profit counsellor, you will likely pay more in fees. You may also pay more if you enroll in a DMP. Before starting a DMP, make sure you ask about fees, which could include: 

  • Set up fees
  • Monthly administration fees
  • Application fees
  • Membership fees
  • Upfront fee or a fee for each creditor 

How Do I Choose A Good Credit Counselling Agency? 

When looking for a credit counsellor, take the time to do your research. There are both not-for-profit and for-profit credit counselling companies. Before you choose a credit counsellor, compare multiple providers on factors such as fees, services, counsellor qualifications, and reputation. 

  • Ask Questions. Since most credit counsellors offer a free initial consultation, you can use this time to ask questions and get a general feel for the counselling company. 
  • Beware of ‘Too Good To Be True’ Offers. Watch out for credit counselling companies making promises that sound too good to be true. For instance, if the company claims they can fix your credit report, consider this a red flag. It is not possible to remove accurate data from your credit report. Similarly, if a company claims they are part of a government program, beware. A consumer proposal and bankruptcy are the two government-regulated insolvency proceedings that can discharge you from debt. Only a Licensed Insolvency Trustee can administer these debt solutions. 

Credit Counselling Canada – Is it right for you?

If you’re tired of trying to navigate your debt or credit issues alone, you might benefit from credit counselling. Credit counsellors can provide financial education and tools to help you manage your debt and improve your financial situation. Before choosing a credit counsellor, take some time to compare different companies to ensure you find a counsellor that fits your needs and your budget. 

Credit Counselling FAQs

Are credit counsellors licensed or accredited? 

While credit counsellors are not legally required to have a specific license or accreditation, many do. For instance, all Credit Counselling Canada members must have the Accredited Financial Counsellor Canada certification which is offered through the Association for Financial Counseling and Planning Education.

How do I know my credit counsellor is legit? 

Before working with a credit counsellor, ask about their qualifications and if they have any specialized training. You can also research the credit counselling company to see if they are legitimate and check organizations like the Better Business Bureau to review any customer complaints. 

What debts are covered through credit counselling? 

A debt management plan (DMP), which is available through some credit counsellors, does not cover all debts. Typically, covered debts include credit cards, personal lines of credit, and unsecured personal loans. A DMP generally won’t cover secured debts such as a mortgage or car loan. 

Will credit counselling affect my credit score?

Simply speaking to a credit counsellor will not affect your credit score. If you enroll in a debt management plan (DMP), it will be noted on your credit report for current and future creditors to see. 
Jessica Martel avatar on Loans Canada
Jessica Martel

Jessica is a freelance writer, professional researcher, and mother of two rambunctious little boys. She specializes in personal finance, women and money, and financial literacy. Jessica is fascinated by the psychology of money and what drives people to make important financial decisions. She holds a Master's of Science degree in Cognitive Research Psychology and Bachelor's degrees in Communications, and Psychology. Her work has been published on Investopedia, The Balance, Money Under 30, Time.com, Seeking Alpha, Consumer Affairs, and more.

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