How To Choose The Best Credit Counseling Service

How To Choose The Best Credit Counseling Service

Written by Lisa Rennie
Fact-checked by Caitlin Wood
Last Updated December 20, 2022

Whether you’re single or providing for a family, debt and the issues that come along with it are never fun or easy to deal with. Sometimes accepting help is the first step you need to take in order to get your finances back on track. 

While there are many debt relief options available, speaking to a credit counsellor is a great first step. 

What Is A Credit Counsellor?

A credit counsellor is a trained professional who provides credit counselling services to Canadians facing difficulties with their debt. In Canada, there are non-profit credit counselling agencies and for-profit companies. Depending on the one you choose, the fees can vary greatly. 

The first part of the credit counselling process begins with an evaluation of your situation and an assessment of appropriate options for relief. More specifically, your counsellor will look at all your debts, credit, finances, and budget to see where you stand financially.

If you have the financial means to repay what you owe but need some guidance, your credit counsellor will help you get started in a debt repayment plan, which involves paying back your debts efficiently. Otherwise, there are other options available that may help you deal with your debts. 

The debt solutions you may wish to explore include the following:

Each solution has its pros and cons, which you should weigh before choosing the solution that suits you best. 

When Should You Seek A Credit Counsellor?

If you’re struggling to manage your debt, it may be worthwhile to speak to a credit counsellor. You may learn something new that can help you get your finances on track.

Credit counsellors can introduce you to a variety of debt relief solutions, ranging from simple debt management assistance to more aggressive solutions like bankruptcy and everything in between. 

If you’re still able to scrounge together enough money to meet your bill due dates but are finding it difficult, this is the best time to reach out to a credit counsellor before things get out of hand. Perhaps they can offer a solution that can help you avoid taking more significant steps. 

Credit counsellors may be right for you if you:

  • Can’t make any progress paying down your debt
  • Are only making minimum bill payments every month
  • Spend over 10% of your monthly income on debt repayment
  • Have bad credit
  • Are unable to consolidate your debt on your own
  • Want to avoid hurting your credit score caused by debt settlement, a consumer proposal, or bankruptcy 

How To Choose The Best Credit Counselling Service?

There are many credit counselling agencies in Canada, but how do you choose one to work with? 

There are a few key factors to look at before deciding on an agency, including the following:

Are They Legitimate? 

Look into the credit counselling agency’s reputation to ensure they’re maintaining certain standards of practice in the industry. They should also be licensed in the province they operate in. You don’t want to deal with any agency that has a reputation for false advertising or late payments to creditors.

What Are the Costs?

In Canada, there are non-profit credit counselling agencies and for-profit companies. Depending on the one you choose, the fees can vary greatly. Be sure to ask your agency if there are any fees for the first consultation and what kind of support they offer.

Of course, do note, that depending on the debt relief option you choose, there are certain mandatory filing costs. For instance, a consumer proposal costs $1,500 to file, after which you’ll be required to make repayments to handle your debt. And first-time bankruptcy filing fees are around $1,800, with additional costs if you earn surplus income. 

However, these costs are not charged by the credit counsellor and instead are paid to your Licensed Insolvency Trustee where applicable. 

Are They Qualified?

In addition to being properly licensed in the province they provide services, the credit counselling agency should not have a laundry list of complaints, which you can find through the Better Business Bureau (BBB) or l’Office de la protection du consommateur in Quebec.

You should also find out what qualifications the specific counsellor has, such as their education, specialized training, and years of experience.

Are You Comfortable? 

No credit counselling agency should ever coerce you into using their services. You should also gauge the counsellor’s judgment. If you feel uncomfortable with the aggressive nature of a company, request a new counsellor or walk away altogether. 

Benefits Of Credit Counselling

Credit counsellors offer several benefits, including the following:

They Provide Educated Guidance

Credit counsellors are trained professionals who are skilled in helping consumers get a handle on their finances. They can provide an unbiased opinion of your debt situation and suggest potential solutions that best suit their needs. 

They Offer Assistance In Budgeting

Coming up with a sound budget is an essential part of managing your finances effectively. Your credit counsellor can help you develop a budget based on your income and debt to help you get a better handle on your financial obligations. This can help you avoid damage to your credit or worse, insolvency. 

They Can Speak With Creditors On Your Behalf

Your credit counsellor can speak with your creditors to negotiate an arrangement to either reduce what you owe, lower your interest rate, or extend the amount of time you have to repay your debt. Creditors may be more open to making such an arrangement with a credit counsellor working on your behalf, since they may already have established a record of successfully helping clients get out of debt while considering the best interests of creditors. 

Alternative Solutions To Credit Counselling

If you prefer to solve your debt problems yourself, there are a few things you can try including the following:

The most common option for debt relief is a debt consolidation loan; these can be secured or unsecured loans. The one you qualify for will depend on your financial situation.

  • Secured Debt Consolidation Loans: To be approved for a secured loan you’ll need to put up some kind of collateral. Most consumers typically use their house or car. These loans are easier to qualify for due to the security it adds, however, they can be very risky for you as if you fail to make your payments you’ll be putting your asset at risk.
  • Unsecured Debt Consolidation Loans: This type of loan is best suited for those who have higher credit scores and income because there is no collateral required. An unsecured loan is meant to help individuals who need to consolidate their debt into one smaller monthly payment.

Credit Counselling FAQs

How do I know if I need credit counselling?

There are many early warning signs that your debt may be getting out of control and that you should seek a credit counsellor. Some signs that indicate you should a credit counselling service include;
  • Using your credit card to pay for everything because you never have any cash.
  • Only making the minimum payment on your credit card each month.
  • Taking cash advances on your credit cards to pay off other debts you have.
  • Requesting an increase on your limit every time you max out a card.
  • Hiding your spending from your family.

Will credit counselling negatively affect my credit scores?

Speaking with a credit counsellor will not affect your credit. Only if you proceed with certain debt relief programs will your score be impacted. For example, filing for debt settlement, consumer proposal, or bankruptcy will affect your credit.

How can I differentiate between a reputable credit counselling agency and a scam?

Keep an eye out for tell-tale red flags to spot scammers. For instance, some agencies promise to resolve your debt issues quickly or improve your credit score. Others may be very pushy with their services, and others may charge for their initial consultations. All of these are signs that you may not be dealing with a legitimate credit counselling agency.

Bottom Line

If you’re stressed about credit card bills that are started to pile up, a personal loan that you’re having trouble keeping up with or predatory payday lenders that won’t stop harassing you, the first step you need to take is to ask for help, preferable from a debt specialist like a credit counsellor.

Setting up a meeting with a professional credit counsellor is the best way to start your journey toward a debt-free life. They will provide you with personalized information and help you decide what debt relief option is best for your situation.

Rating of 5/5 based on 2 votes.

Lisa has been working as a personal finance writer for more than a decade, creating unique content that helps to educate Canadian consumers in the realms of real estate, mortgages, investing and financial health. For years, she held her real estate license in Toronto, Ontario before giving it up to pursue writing within this realm and related niches. Lisa is very serious about smart money management and helping others do the same.

Click on the star to rate it!

How useful was this post?

Research & Compare

Canada's Loan Comparison Platform

Largest Lender Network In Canada

Save time and money with Loans Canada. Research and compare lenders before you apply. Share your experiences with Canada's top lenders.

Save With Loans Canada

Special Offers

Borrow $500-$50,000

Borrow $500-$50,000

Don’t pay until March with this offer from our partner, Fairstone.* Ends January 31st.

View Offer
Cashback & Bonus Offer

Cashback & Bonus Offer
Ends March 1st, 2023

New Offer! Get up to $2,000 cashback + a $50 bonus on signing up. Conditions apply.

View Offer
Earn 5% Cash Back With Neo

Earn 5% Cash Back With Neo
No annual fee!

Earn an average 5%¹ cash back at thousands of partners and at least 0.5%² cashback guaranteed.

View Offer
Build Credit For $10/Month

Build Credit For $10/Month

With KOHO’s prepaid card you can build a better credit score for just $10/month.

View Offer
Best Personal Loan Provider by Greedy Rates

Confidential & risk-free

All consultations and conversations with Loans Canada and its partners are confidential and risk-free. Speak with a trusted specialist today and see how we can help you achieve your financial goals faster. Loans Canada and its partners will never ask you for an upfront fee, deposit or insurance payments on a loan. Loans Canada is not a mortgage broker and does not arrange mortgage loans or any other type of financial service.

When you apply for a Loans Canada service, our website simply refers your request to qualified third party providers who can assist you with your search. Loans Canada may receive compensation from the offers shown on its website.

Only provide your information to trusted sources and be aware of online phishing scams and the risks associated with them, including identity theft and financial loss. Nothing on this website constitutes professional and/or financial advice.

Your data is protected and your connection is encrypted.

Loans Canada Services Are 100% Free. Disclaimer

Build Credit For Just $10/Month

With KOHO's prepaid card you can build a better credit score for just $10/month.