What is Credit Counselling?

How does credit counselling work in Canada?

Credit counselling in Canada helps you deal with debt problems, whether you owe credit card debt, personal loans, student debt, or another type of unsecured debt.

The Financial Consumer Agency of Canada (FCAC) recommends credit counselling as a first step for anyone having trouble keeping up with payments.

Source: Financial Consumer Agency of Canada – Getting help from a credit counsellor

You can access credit counselling through both non-profit organizations and for-profit companies. Non-profit agencies accredited by Credit Counselling Canada (CCC) or the Canadian Association for Financial Empowerment (CAFE) are the safest choice. CAFE administers the Accredited Financial Counsellor Canada (AFCC) and Certified Financial Counsellor (CFC) designations.

A credit counsellor reviews your income, expenses, and debts, then explains what you can do about them.

What services do credit counsellors offer?

Credit counsellors help with debt, budgeting, credit use, and other financial issues. While there is no legal requirement for certification, many credit counsellors hold the Accredited Financial Counsellor Canada (AFCC) or Certified Financial Counsellor (CFC) designation.

A counsellor will review your debts, income, and expenses to work out your financial situation and recommend the best path forward. That recommendation should cover all available options, not just the one the agency offers.

If a counsellor only talks about one solution without explaining the alternatives, find a different counsellor. A legitimate credit counsellor can cover everything from budgeting adjustments to a Debt Management Plan or a referral to a Licensed Insolvency Trustee.

What a credit counsellor can recommend

If you need help with your debts, the counsellor recommends the best way to deal with them. Sometimes the fix is simple: better budgeting, cutting specific expenses, or restructuring how you pay down balances.

If that is not enough, the counsellor recommends a debt relief program. That includes a Debt Management Plan, a debt consolidation loan, a consumer proposal, or bankruptcy. Your counsellor should explain the pros and cons of each.

Credit counsellors can also negotiate with your creditors directly, set up a repayment plan, or help you apply for a consolidation loan.

How does a Debt Management Plan work?

A Debt Management Plan (DMP) is the main repayment program offered through credit counselling in Canada. It is an informal arrangement between you, your credit counsellor, and your creditors.

When you enrol in a DMP, you make a single monthly payment to the credit counselling agency. The agency distributes the funds to your creditors according to the plan. Most creditors reduce or stop interest and charges on your debts once the DMP is in place.

You repay 100% of the principal owed within the agreed timeframe, usually three to five years. The maximum term is 60 months.

A DMP is voluntary. Creditors do not have to accept the plan, and they can withdraw. If a creditor declines, the counsellor will suggest you arrange payments directly with that creditor.

During the program, your credit counsellor supports you with budgeting guidance and workshops on spending and credit use. The agency charges administration fees for managing the plan.

What debts are covered

A DMP covers most unsecured debts, including credit card balances, personal loans, unsecured lines of credit, overdue utility bills, and some collection accounts.

DMPs do not cover secured debts like mortgages or car loans. They also do not typically cover student loans, payday loans (most payday lenders refuse to participate), or tax debts owed to the Canada Revenue Agency (CRA).

If CRA tax debt or student loans make up most of what you owe, a consumer proposal through a Licensed Insolvency Trustee is a better fit. A consumer proposal can include tax debts and, in most cases, student loans if you have been out of school for more than seven years.

How much does credit counselling cost?

Getting advice from a non-profit credit counselling agency is free. Many agencies also offer ongoing budgeting and financial education at no cost.

Fees apply if you enrol in a Debt Management Plan. As of 2026, non-profit agencies typically charge an administration fee based on a percentage of your monthly DMP payment, plus a possible setup fee. These fees vary by agency and by province.

The FCAC recommends comparing the agency’s fees to the interest you save under the DMP. If the fees exceed the interest savings, a DMP does not make financial sense for you.

Source: Financial Consumer Agency of Canada – Getting help from a credit counsellor

For-profit credit counselling firms have different fee structures and are not held to the same accreditation standards. Always get a complete fee breakdown before you commit, and stick with a non-profit agency accredited by Credit Counselling Canada or CAFE.

Does credit counselling affect your credit score?

Speaking with a credit counsellor does not affect your credit score. But if you enrol in a debt relief program, it appears on your credit report.

How a Debt Management Plan affects your credit

When you enrol in a DMP, each account included in the plan receives a “7” payment rating on your credit report. On revolving credit accounts like credit cards, this appears as R7. The “7” means you are making regular payments through a special arrangement to settle your debts.

Equifax Canada’s rating system defines six account types: R (revolving), I (instalment), O (open), C (line of credit), L (lease), and M (mortgage). All use the same 0 to 9 payment scale. In theory, an instalment loan included in a DMP carries an I7 rating. In practice, almost every source refers only to R7, likely because credit cards and other revolving accounts make up the bulk of unsecured debt in these programs.

An R7 is lower than R1 (on-time payments) but less severe than R9, which is assigned in bankruptcy or when debts are sent to collections. You will find it harder to get new credit while the notation is on your report.

Equifax’s credit report system also flags these arrangements with specific codes in the public records section of your report. CDC (consumer debt counselling) identifies a DMP, while PR/BK (proposal under bankruptcy) identifies a consumer proposal, and CRCLD (court consolidation) identifies a court-ordered debt consolidation.

Source: Equifax Canada – Consumer Credit Report User Guide, 2017

A DMP notation stays on your credit report for two years after you complete the plan, or six years from the date of default on the original debt, whichever comes first.

Source: Equifax Canada – How long does information stay on my Equifax credit report

How other debt solutions affect your credit

Debt consolidation through a loan involves a credit inquiry that temporarily lowers your score, but it recovers quickly if you make payments on time.

A consumer proposal also results in an R7 credit rating. It remains on your credit report for three years after you complete the proposal or six years from the filing date, whichever is sooner.

Bankruptcy results in an R9 rating, the most severe. It stays on your report for six to seven years after discharge for a first-time filing.

Source: Government of Canada – How long information stays on your credit report

If you fail to complete a debt solution, the damage to your credit score is worse. But if you make payments on time and reduce your debt, you avoid collections, and your credit improves over time.

How do you avoid credit counselling scams?

Credit counselling is not a regulated title in Canada. Anyone can call themselves a credit counsellor. That means you need to check credentials yourself.

What to verify

Look for membership in Credit Counselling Canada (CCC), which requires agencies to be non-profit, maintain accreditation standards, and ensure all counsellors hold a professional designation. CCC does not allow counsellors to be paid on commission, which keeps advice objective.

The Canadian Association for Financial Empowerment (CAFE) administers the CFC and AFCC designations and sets agency accreditation standards through the Canadian Centre for Accreditation.

Confirm the agency is a registered Canadian charity and check the Better Business Bureau for complaints.

Source: Credit Counselling Canada – Membership and accreditation standards

Red flags

Be wary of any agency that charges upfront fees before providing services, guarantees specific results, or pressures you to sign immediately. The FCAC warns that some for-profit companies mislead consumers by offering to help pay off debt or repair credit.

If a counsellor only recommends one solution without explaining the alternatives, that is also a problem. A legitimate credit counsellor explains everything from budgeting changes to a DMP to a referral to a Licensed Insolvency Trustee.

If something feels off, walk away. There are reputable non-profit agencies across every province.

Source: Financial Consumer Agency of Canada – Getting help from a credit counsellor

Is credit counselling the right option for you?

Credit counselling and a DMP are the right fit when you can afford to repay 100% of the principal within five years, provided your creditors agree to reduce or eliminate the interest. If your total unsecured debt is under $20,000 and you have a steady income, a DMP is worth looking at.

If your debts are larger than that and full repayment within five years is not realistic even without interest, a consumer proposal or bankruptcy through a Licensed Insolvency Trustee makes more sense. The same applies if you owe CRA tax debt, since CRA does not typically participate in voluntary DMPs.

Here is the simplest test. Strip the interest from your debts and divide the remaining balance by 60 months. If you can handle that monthly payment, credit counselling works. If you cannot, you need a different solution.

How does credit counselling compare to other debt solutions?

	Debt Management Plan	Consumer proposal	Bankruptcy
Amount repaid	100% of principal	Portion of total debt	Portion of total debt
Interest	Reduced or eliminated	Stopped completely	Stopped completely
Creditor agreement	Voluntary	Legally binding once majority accepts	Legally binding
Administered by	Non-profit credit counselling agency	Licensed Insolvency Trustee	Licensed Insolvency Trustee
Legal protection from creditors	None	Full stay of proceedings	Full stay of proceedings
Maximum term	60 months	60 months	9 or 21 months (first time)
Credit notation	R7 for 2 years after completion	R7 for 3 years after completion	R9 for 6 to 7 years after discharge
Tax debt included	No	Yes	Yes

A consumer proposal allows you to repay a portion of your debt, with the rest forgiven. Payments are interest-free and spread over up to 60 months. It is a legal process under the Bankruptcy and Insolvency Act, filed through a Licensed Insolvency Trustee.

Bankruptcy discharges most of your debts entirely. For a first-time filing, it lasts 9 months if you have no surplus income, or 21 months if you do. It is also filed through a Licensed Insolvency Trustee.

Frequently asked questions

Is credit counselling free?

Getting advice from a non-profit credit counselling agency is free. If you enrol in a Debt Management Plan, you pay setup and monthly administration fees. These fees vary by province and by agency, and are typically included in your monthly payment.

What is the difference between credit counselling and a consumer proposal?

Credit counselling is an informal service where you repay 100% of your debt through a Debt Management Plan. It is voluntary for creditors.

A consumer proposal is a legal process filed by a Licensed Insolvency Trustee under the Bankruptcy and Insolvency Act. A portion of your debt is forgiven, and once a majority of creditors accept, the proposal is binding on everyone. Both result in an R7 credit notation.

Can credit counselling stop collection calls?

If you enrol in a DMP, most creditors stop calling once they agree to the arrangement. But participation is voluntary, and creditors who do not agree can continue collection efforts.

If you need legal protection from all creditors, a consumer proposal or bankruptcy through a Licensed Insolvency Trustee provides a stay of proceedings that stops all collection activity.

What debts can be included in a Debt Management Plan?

A DMP covers unsecured debts like credit cards, personal lines of credit, and some overdue bills. It does not cover mortgages, car loans, tax debt owed to CRA, student loans, or child support.

If tax debt or student loans are the main issue, a consumer proposal through a Licensed Insolvency Trustee is a better option.

Will credit counselling affect my ability to get a mortgage?

A DMP puts an R7 rating on your credit report, which mortgage lenders will see. Most people need to wait until the R7 notation clears before qualifying for a mortgage at competitive rates. That means two years after you complete the plan, or six years from the date of default, whichever comes first.

How long does a Debt Management Plan take?

A DMP lasts up to 60 months (five years). Most plans are completed in three to five years, depending on how much you owe and what you can pay each month. There is no penalty for paying it off early.

How do I find a legitimate credit counsellor?

Look for a non-profit agency accredited by Credit Counselling Canada or the Canadian Association for Financial Empowerment (CAFE). Confirm it is a registered Canadian charity and check the Better Business Bureau for complaints.

Ask whether counsellors hold the AFCC or CFC designation, and confirm that no counsellor is paid on commission. If an agency charges upfront fees, guarantees specific outcomes, or pressures you to sign immediately, find another one.

Get the right advice for your situation

If your debts are getting harder to manage, a free consultation with a non-profit credit counsellor is a sensible first step.

You can also book a free, confidential appointment with a Licensed Insolvency Trustee to find out whether credit counselling, a Debt Management Plan, a consumer proposal, or another option is the right fit for your situation.