What is credit counselling?
Credit counselling is a goal-oriented financial conversation between yourself and an accredited credit counsellor where you will discuss your credit score, debt history, and any other money management concerns that you may have.
The purpose of credit counselling is to provide the credit education, support, and resources you need to meet your personal financial goals. For most people, credit counselling is the first step in a debt management plan, but other services may include: budgeting, building/improving credit, or creating a savings plan.
What does a credit counsellor do?
Credit counselling is a goal-oriented financial conversation between yourself and an accredited credit counsellor where you will discuss your credit score, debt history, and any other money management concerns that you may have.
The purpose of credit counselling is to provide the credit education, support, and resources you need to meet your personal financial goals. For most people, credit counselling is the first step in a debt management plan, but other services may include: budgeting, building/improving credit, or creating a savings plan.
Get the right credit advice at the right time.
Not-for-profit credit counsellors are expected to provide you with an overview of your debt-relief options, not sell you a product. Regardless of if you need a better budget, to mediate a money management conversation between you and your spouse, or to repay your creditors, your counsellor can provide the tools you need (typically in the first appointment). The most common services are:
- Household budgeting (individual or couple)
- Debt management plans (low-or-no-interest)
- Debt settlements (no interest, reduced total)
- Self-managed repayment plans/suggestions
Or, if a consumer proposal or bankruptcy is the best solution, your counsellor will refer you to a licensed insolvency trustee in your area at no cost to you.
What happens during a credit counselling session?
During a credit counselling session, a qualified credit counsellor will ask you questions about your family size, income, assets, liabilities, debts, budget, and goals. Your counsellor may also ask questions about how your current financial situation makes you feel. Using this information, your counsellor will determine next steps based on the three S’s: safety, stability, and success. If your situation is unsafe or you are in an immediate financial crisis, fixing that is step one.
From there, your counsellor will help you to create a realistic budget and/or repayment plan to stabilize your finances and ensure future financial success.
How much do credit counsellors cost?
Speaking with an accredited, non-profit credit counsellor at the Credit Counselling Society is 100% free–even if you attend more than one session!
Are credit counsellors financial advisors?
No. While some of the services a credit counsellor offers overlap with what a financial advisor offers, credit counsellors are NOT financial advisors.
What’s the difference between credit counsellors and financial advisors?
Credit counsellors deal with credit (good and bad) and focus on everyday affordability, managing debt, and establishing savings. Financial advisors do this as well but from the perspective of wealth-building and financial investment.
In a nutshell, if you have several credits cards that you are struggling to manage or need a better household budget, a credit counsellor can help. If you need advice on if you should invest in Space X or Dogecoin, that’s a financial advisor.
How do credit counsellors help me become debt free?
In the real world, debt happens. Dogs get sick, kids have hockey, cars need winter tires; managing debt isn’t just about what’s on the credit report, or about the collection companies calling, or the bills that have fallen behind; it is about you, your personal financial situation, and a plan that makes sense for you.
If you are struggling with money or debt, a credit counsellor can help you:
Budget
Credit counsellors call it the ‘magic wand test’. If someone were to wave a magic wand and POOF! your debt was suddenly gone, would you be able to manage your everyday expenses and obligations? If the answer is no, the problem isn’t actually your debt, it’s your budget. Budgeting is the first step in any good debt recovery plan, and your counsellor can help you create an easy-to-follow budget that works for you even if you have never used a budget before.
Manage Debt
Managing debt can feel overwhelming; who do you pay first, how long will it take to repay, what if you can’t afford to pay at all? A credit counsellor can not only answer these questions to help you handle things on your own, but they can also provide low-or-no-interest debt management programs to help you become debt free without filing personal bankruptcy or consumer proposal.
Settle Debt
In situations where an individual cannot afford to repay all their debt but can pay a portion of it, credit counsellors can assist by negotiating a reduced-cost settlement agreement with each creditor. Settlements are ideal for individuals who have a sum of money (such as an insurance payout) that is not enough to pay 100% of the debt owed but enough to pay 30% or more.
Stop Debt
In some situations, the right decision is to say ‘no more’ to your debt, and that’s okay too. When a consumer proposal or personal bankruptcy is the right tool for the job, your counsellor will explain why, will give you an overview of the estimated cost, will explain any possible credit implications, and will provide you with a pre-vetted referral to a licensed insolvency trustee in your area.
What is a Debt Management Program (DMP) and how does it work?
A Debt Management Program (DMP) is a voluntary no-or-low-interest plan negotiated by a credit counselling agency to help you repay your debts.
In brief, each one of your creditors will agree to reduce interest (most often to 0%) but will require repayment in full within 5 years or less. DMPs offer a good alternative to consumer proposal or personal bankruptcy, help limit the damage done to your credit score, and generally have fewer rules and restrictions.
What debts can be included in a DMP?
Any secured debt can be included in your program however, DMPs cannot assist with CRA debt, CERB, or student loans. In most cases your credit counsellor can provide alternative solutions for these types of debts outside of a DMP.
What does a DMP do to your credit score?
DMP programs are considered ‘credit sparing’ which means that while there will be some impact to credit score, it will be less than if you filed a consumer proposal or bankruptcy. This record will be wiped clean 2 years following successful program completion and does not prevent future borrowing.
Is a DMP similar consumer proposal?
Debt Management Programs are very different than consumer proposals. First, you will repay the total amount of your debt, just with low-or-no-interest. Second, DMPs do not consider your assets—your house, car, savings plans, and any other items will not be impacted in any way. Lastly, DMPs are voluntary and can be negotiated by a credit counsellor without involving a trustee.
Will a DMP help me build my credit?
Yes and no. While a DMP program will not directly build credit, a DMP will allow you to pay off your debts faster and with significantly lower interest rates than if you were to repay on your own. Upon successful completion of a DMP your counsellor will provide next steps for repairing credit and building wealth.
How do I get approved for a DMP?
Unlike a consumer proposal or bankruptcy, eligibility for a DMP is determined by only two questions: (1) do you have debts to repay and (2) will a DMP help you repay them? Before getting started, your counsellor will carefully review your situation and determine if a DMP is affordable, logical, and if it will address both your current situation and future credit goals. If it will, your counsellor will prepare a program outline and get the negotiation process started.
Debt happens. You don’t have to deal with it alone.
Get free credit counselling services now
Across the country, over 65% of Canadians are now carrying non-mortgage debt from credit cards, lines of credit, payday loans, and other high-interest loans. As this number continues to grow, individuals and families are expected to continue struggling to make ends meet, but it doesn’t have to be that way.
Credit counselling services with the Credit Counselling Society are always free, always confidential, and will provide the information, resources, and financial tools that you need to make an informed decision—even if that decision doesn’t involve us. If debt is keeping you awake at night, distracting you at work, causing arguments or giving you anxiety at home, call, click, or chat: we can help you.