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Published July 29, 2021

What to Know if You’re Considering Credit Counselling Services

Credit counselling offers advice and strategies to help manage debt. There are for-profit and non-profit services available, so make sure you find assistance from reputable professionals.

If you don’t have savings, you struggle to pay your debts, your chequing account is overdrawn or you rely on loans to pay your bills, you may want to talk to a credit counsellor.

Credit counselling services provide personal finance advice and strategies to help you manage your debt. A wide range of services and providers are available, so it’s important to understand how credit counselling works and what to look for in a credit counsellor.

How does credit counselling work?

A credit counsellor can give you advice, strategies and practical solutions for getting (and hopefully staying) out of debt. You should look for a credit counselling agency that’s non-profit, reputable, accredited and has an “A” rating with the Better Business Bureau.

Avoid for-profit companies because they may be unable to reduce the size of your payments since many do not have good relationships with creditors. They also often overcharge, taking away precious funds that could otherwise go towards paying your debt.

Good credit counsellors are trained professionals accredited through the Association for Financial Counseling & Planning Education (AFCPE). Many have years of experience helping people get out of debt or improving others’ financial knowledge and skills. Credit counselling also doesn’t have to carry a cost.

No matter who you work with, first appointments always involve a debt assessment. A debt assessment lays out all your expenses, debts, income and assets, so all your cards are on the table. From there, a credit counsellor will work with you to help you follow a budget and create a plan that’s best for you to repay your debts.

Credit counselling services

Credit counselling agencies have several services to assist you in getting out of debt and staying out of debt in the future.

Tracking expenses and creating a budget

Credit counsellors can help you learn how to track your expenses and create a budget for yourself so you are not overspending and potentially getting into more debt. Sometimes sticking to a budget and realizing how much you actually spend in a given month is all you need to curb your expenses and get your debt under control.

» MORE: How to save money

Debt repayment education

Credit counsellors can teach you several strategies for repaying debt more efficiently, such as the snowball or the avalanche method. The snowball method prioritizes paying off your smallest debts first, while the avalanche method makes debts with the highest interest rate your top priority.

Debt management plan

Credit counsellors can facilitate a debt repayment plan on your behalf. They can approach your creditors with an informal payment plan where you make smaller payments over a longer period of time. If agreed to, this option may be better for your budget and your schedule.

Credit counsellors also may be able to get you a lower or zero interest rate. While you will still have to pay all your debt to all your creditors, a credit counsellor will consolidate your monthly payments into one payment and distribute the funds to your creditors.

However, credit counsellors can only consolidate credit card debt, lines of credit and unsecured loans into a debt repayment plan. They can ask collection agencies to stop calling, but they have no power to make them do so, as a licensed insolvency trustee would.

Furthermore, a debt management plan will not reduce your debt in the way an informal debt settlement may. A debt settlement is where you negotiate directly with your creditors to pay only a portion of your debt.

Advice on next financial steps

A credit counsellor can help you decide if the following debt clearing options are right for you

  • A debt consolidation loan from a bank or credit union, which consolidates many unsecured debts into one loan backed by collateral
  • A consumer proposal or a bankruptcy, which requires a licensed bankruptcy and insolvency trustee

Non-profit vs. for-profit credit counselling

While non-profit credit counselling doesn’t necessarily mean free, it usually means low- or no-cost due to grants and donations made to non-profit credit counselling agencies by the credit industry, the provincial and federal governments, and the United Way. If you opt for a debt management plan, there is usually a one-time set-up fee of $75 and a monthly administration fee of $50. If the client isn’t in a financial position to pay the fees, they will be waived.

For-profit credit counselling agencies, on the other hand, are private businesses that can charge what they want based on company policy, they are not required to be a member of an accredited credit counselling association (though many are), and their relationships with creditors vary since they are not funded by the credit industry.

Furthermore, for-profit companies may receive commissions for pushing clients into a debt management plan. The cost of these plans may be significantly higher, ongoing, and not based on the client’s budget. Clients may also be required to pay for debt analysis or other financial resources, like budget books or videos, which wouldn’t be the case with a non-profit credit counsellor.

Does credit counselling hurt your credit?

Simply seeking credit counselling and receiving advice on debt management or general financial education will not affect your ability to apply for credit. However, a debt management plan will be noted on your credit report as an R7 for about two to three years and may increase your chances of being rejected by creditors.

» MORE: How to get a better credit score

About the Author

Aaron Broverman

Aaron Broverman has been a personal finance journalist for over a decade. His work has appeared on such outlets as Yahoo Finance Canada, Bankrate and, Money Under 30, Wealth Rocket, and This former Toronto transplant via Vancouver now lives in Waterloo with his wife and son.


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