Does credit counselling show up on your credit report?
A credit counselling session differs from a credit counselling program. During the session, a credit counsellor reviews your income, expenses, and debts, then explains your options. This session does not appear on your credit report.
Neither Equifax Canada nor TransUnion Canada receives any information when you sit down with a credit counsellor.
The counsellor may pull your credit report during the session, but that pull is a soft inquiry. The Financial Consumer Agency of Canada (FCAC) confirms that soft inquiries don’t affect your credit score and are only visible to you.
Source: Financial Consumer Agency of Canada – Improving Your Credit Score
Your credit is only affected if you take the next step and enroll in a debt management plan. The session itself is just free information with no impact on your credit.
What happens to your credit score when you start a debt management plan?
A debt management plan is an informal proposal your credit counsellor makes to your creditors on your behalf.
You make one monthly payment to the credit counselling agency, and the agency distributes it to your creditors. You repay 100% of the principal, but your creditors reduce or eliminate the interest.
Source: Financial Consumer Agency of Canada – Getting Help from a Credit Counsellor
How the R7 rating works
When you enter into a debt management plan, your creditors update their own account records with the credit bureaus. Each included account gets an R7 credit rating.
The credit counselling agency does not report the plan to Equifax or TransUnion. Your individual creditors do.
An R7 means you are making regular payments through a special arrangement to settle your debts. For context, R1 means you pay on time. R9 means your account is in collections or bankruptcy.
The effect on your credit score depends on your current situation. If you already have late payments or collection accounts, a drop in your score will be less noticeable.
How long does a debt management plan stay on your credit report?
All debts included in a debt management plan are removed two years after completing the program, or six years after starting (whichever comes first).
Source: Financial Consumer Agency of Canada and Credit Counselling Society
How does that compare to other debt relief options?
Here is how the credit report retention periods compare across the three main formal debt relief options in Canada.
| Debt relief option | Credit rating | Retention period |
|---|---|---|
| Debt management plan | R7 | 2 years after completion or 6 years after starting (whichever comes first) |
| Consumer proposal | R7 | 3 years after completion or 6 years from filing (whichever is sooner) |
| First bankruptcy | R9 | Equifax: 6 years after discharge. TransUnion: 6 to 7 years after discharge (varies by province) |
Source: Financial Consumer Agency of Canada – How Long Information Stays on Your Credit Report
A debt management plan has the shortest notation period of any formal debt relief option. The trade-off is that you repay 100% of the principal.
A debt management plan is an informal arrangement, not a legal proceeding under the Bankruptcy and Insolvency Act. If your debt is manageable enough for a DMP, you can avoid the insolvency system altogether.
Can you rebuild your credit after a debt management plan?
Credit rebuilding starts the moment the plan is complete. You can even begin while the plan is active.
The most common first step is a secured credit card. You put down a deposit, and the card issuer gives you a credit limit equal to that deposit.
Use it for small purchases and pay the balance in full each month. That builds new, positive payment history on your credit report.
It’s recommended that you keep your credit usage below 30% of your available limit. So, if your secured card has a $1,000 limit, keep the balance under $300.
Source: Financial Consumer Agency of Canada – Improving Your Credit Score
The impact of a debt management plan on your credit score fades over time. Once it drops off, the accounts included in the DMP no longer drag down your score.
For people who want to avoid insolvency, a debt management plan can be a better path back to good credit than continuing to miss payments ever would be.
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Frequently asked questions
Does talking to a credit counsellor hurt your credit score?
No. A credit counselling session on its own is not reported to Equifax Canada or TransUnion Canada.
The counsellor may review your credit report during the session, but this is a soft inquiry that does not affect your score. Your credit is only affected if you enrol in a debt management plan.
Is the credit check during a credit counselling session a hard or soft inquiry?
It is a soft inquiry. Soft inquiries are only visible to you and do not lower your credit score. Hard inquiries, which can lower your score, only happen when you apply for new credit.
Does a debt management plan show up on your credit report?
Yes. When you enter into a debt management plan, your creditors report the included accounts with an R7 credit rating.
The credit counselling agency itself does not report the plan. Each creditor updates its own account record with the credit bureaus.
What is an R7 credit rating?
An R7 is a credit bureau code assigned to revolving credit accounts when the account holder is making payments through a formal debt relief program. It applies to accounts in a debt management plan and accounts in a consumer proposal.
R1 means the account was paid on time, and R9 means the account is in collections or bankruptcy.
Is a debt management plan worse for your credit than a consumer proposal?
Both result in an R7 credit rating on affected accounts. A debt management plan disappears two years after completion or six years after the program starts.
A consumer proposal is removed three years after completion or six years from filing, whichever comes first.
A debt management plan stays on your credit report for a shorter amount of time, but you pay back the full principal amount.
Can you get a mortgage after completing a debt management plan?
Yes, but not right away. Lenders want to see a period of rebuilt credit history after negative information is removed from your credit report. Your down payment and debt-to-income ratio also affect approval.
Does credit counselling affect your spouse’s credit score?
No. Credit counselling and a debt management plan only affect the credit report of the person who enrolls. Your spouse’s credit score is not affected unless they have joint debts included in the plan.
Talk to a Licensed Insolvency Trustee
If you’re not sure whether credit counselling or a consumer proposal is the better fit, a Licensed Insolvency Trustee can review your situation and explain all your options at no cost.
Book a free consultation to find out where you stand.