Credit Counselling Services and Your Credit Report

As a Canadian resident, it’s crucial to comprehend the lasting impact of engaging in a Credit Counselling Service Program. This decision could significantly influence your credit for years to come.

The Dilemma of Debt

Canadians grappling with debt have multiple avenues open to them. However, not all options are created equal. Some carry more severe consequences for the consumer’s credit report than others. When your debt exceeds $7,000, credit counselling programs might not be the most appealing choice.

Not-For-Profit Nature of Credit Counselling Services

Surprisingly, credit counselling services are classified as “not-for-profit”. They rely heavily on donations from major banks to function. Interestingly, consumers often owe significant amounts to these same banks. So, why would banks support organizations that essentially allow consumers to pay less than the initially agreed-upon amount?

The answer lies in the fact that, among all debt relief options, credit counselling programs enable banks to recover most of their money.

The Effect on Your Credit Report

Credit counselling involves the agency negotiating a reduced monthly payment to your creditors over a prolonged period (usually 4-5 years). The impact on your credit is severe. When you join a credit counselling program, all ratings on your credit report shift from a “1” to a “7” and stay that way for three years from the completion date of the credit counselling program.

Limited Authority of Credit Counselling Services

Canadian credit counselling services lack the formal authority to halt collection action by your creditors. This limitation can cause significant stress for consumers already struggling with debt.

Alternatives to Credit Counselling

If your debt surpasses $7,000 and making minimum payments is no longer feasible, other programs sanctioned by the Federal Government may offer more favorable outcomes.

These programs provide immediate protection to consumers with unsecured debt. This protection means that if your debt has been sent to collections, or if you’re facing a lawsuit, these programs can legally stop all collection action.

Debt Settlement – A Viable Option

Debt settlements arranged by these programs are “final settlements”. While they may involve low minimum payments over 3, 4, or 5 years, if your financial situation improves, you can pay the balance of the settlement in full. This action initiates the process of rebuilding your credit. Debt settlement also affects credit for three years from the date it’s paid in full. However, early repayment is an option.

The Need for Financial Advice

Consumers are searching for solutions to manage their debt that don’t involve bankruptcy. What’s crucial is to educate yourself about what’s available and understand the potential implications of each decision. Engaging a Financial Consultant/Advisor to navigate your options can often be an excellent choice.

Your Credit Report

Understanding the impact of credit counselling services on your credit report is essential. A “7” rating on your credit report implies a settled debt, which can negatively impact your creditworthiness in the eyes of future lenders.


In choosing a path towards debt relief, it’s vital to consider the impact on your credit report. While credit counselling services can offer a structured repayment plan, the implications for your future financial health may be significant. Ensuring you are fully informed about all options, including government programs and debt settlement, can help you to make the best choice for your financial future.

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