Credit counselling services come in many forms and may not be what you expect.

Some credit counselling agencies are for-profit, while others are non-profit.

And while some are accredited through reputable associations, not all adhere to high standards of practice.

Others even make false promises to reduce your debt and fix your credit score fast.

This guide will break down what you need to know about credit counselling.

How does credit counselling work?

You can access credit counselling services through both non-profit organizations and for-profit companies.

Accredited and certified non-profit credit counsellors can offer a range of services such as help with debt, budgeting, credit use and other financial issues.

While there’s no legal requirement, many credit counsellors have personal finance and consumer credit qualifications, such as the Accredited Financial Counselor Canada certification.

A credit counselling session starts with a financial assessment to understand your situation and propose a solution. Your credit counsellor will look at your debts, income and expenses as part of the process.

If you need help with your debts, a credit counsellor will recommend the best way to resolve them. Sometimes they’ll explain how you can do this independently through better budgeting or money management.

However, they may also suggest an alternative option, such as a consolidation loan, consumer proposal, bankruptcy or a debt management plan to deal with your debts.

Debt management plans

A debt management plan is a debt repayment schedule that you agree with your creditors. You make a monthly payment to the credit counselling agency, and they distribute the funds to your creditors.

As a result, creditors stop calling, and you may be able to reduce or stop interest and charges on your debts. But as it’s a voluntary agreement, creditors do not have to accept the plan.

If you enter into a debt management plan, you must fully repay your debts in the agreed period, usually within three years.

During the program, you’ll be supported by your credit counsellor, and you’ll pay fees to the credit counselling agency for administering the plan.

Some debts are not covered in a debt management plan, such as student loans, tax debts and secured loans such as mortgages and car loans.

See also: What is a debt management plan?

Consumer proposals and bankruptcies

If you cannot afford to pay back your debts in full, a credit counsellor may recommend a consumer proposal or bankruptcy. Both are formal arrangements filed by a Licensed Insolvency Trustee.

A consumer proposal allows you to pay what you can afford, with the remaining amount forgiven. Payments are interest-free, spread over a period of up to sixty months.

Bankruptcy is a positive step for people struggling with overwhelming debts they cannot afford to repay.

Both solutions use a Stay of Proceedings, which provides legal protection from creditor action upon filing.

Does credit counselling affect your credit score?

Approaching a credit counsellor for advice will not affect your credit. But if you decide to proceed with a debt relief solution, it will appear on your credit report, which can impact your credit score:

  • A debt management plan is recorded on your credit report and disappears two years after completion.
  • Debt consolidation may temporarily lower your credit score, but it will rebound shortly after.
  • A consumer proposal appears on your credit report for three years after you pay off your debts or six years after filing (whichever is sooner).
  • Bankruptcy appears on your credit report for at least six years from the date you are discharged.

If you fail to complete a debt solution, it can severely damage your credit score. But the good news is if you make debt repayments on time and reduce your debt, you’ll avoid collection action and improve your credit in the long run.

Source: Equifax: Credit Counselling

See also: Improve your credit score

Is credit counselling a good idea?

Credit counselling can be a valuable, initial source of information when looking for help with your debt problems.

From there, you might benefit from assistance with money management, debt consolidation, or speaking to a Licensed Insolvency Trustee about a formal solution such as a consumer proposal or bankruptcy.

Most importantly, if you decide to use a credit counsellor, always find a non-profit credit counselling agency through a reputable association such as Credit Counselling Canada.

Do your research and ensure the agency is accredited by a reputable provincial or national association. Look for complaints about the agency through the Better Business Bureau.

Beware of scams and anyone who promises to quickly reduce your debt or repair your credit score. Finally, only use a Licensed Insolvency Trustee for a consumer proposal or bankruptcy.

You can learn more about credit counselling on the Government of Canada website.


If you need to talk about your debt problems, credit counselling can be a useful exercise on the road to becoming debt free.

Non-profit credit counselling agencies can offer added value through individually tailored debt advice and help with budgeting.

However, always make sure the agency is legitimate and accredited by a reputable association.

You can also get free impartial advice from a Licensed Insolvency Trustee, professionals licensed and regulated by the Office of the Superintendent of Bankruptcy.

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