Credit counseling, debt relief, debt consolidation, and credit repair are all different services. BBB recommends thorough research before deciding which is the best solution.
Who can you trust when searching for credit repair and debt relief services?
You'll know who to trust when you see the BBB Seal.
When it comes to debt relief, three things are true:
But how can you know the difference between just a tempting offer and an ethical business that can truly help? By knowing who you can trust. Here’s a rundown of the resources and services you can turn to when you’re experiencing a financial burden.
What is the difference between credit counseling, debt relief, debt consolidation and credit repair?
Credit counseling
Credit counseling is the most comprehensive solution, focusing on various resources to help solve financial issues. It also requires the most work and doesn’t promise immediate relief. Tools include budgeting, educational programs, access to counselors and a personalized plan. Credit counseling may (but doesn’t always) lead to a Debt Management Plan (DMP), where funds are deposited into an account, and the agency pays debts from that account.
Who can you trust?
The U.S. Department of Justice lists credit counseling agencies for people looking for debt reduction assistance. Canada offers help finding a credit counseling agency.
BBB Accredited Businesses have agreed to adhere to the BBB Standards for Trust. Check BBB.org for credit and debt counselors near you, and turn on the filter to see only BBB Accredited Businesses.
Debt relief
Debt relief or settlement companies help by renegotiating the debt so that the person doesn’t owe as much. These companies reach out to creditors and work with them to lower the balance, interest rates or fees. Consumers can also do this to avoid the fees a company like this will charge.
Who can you trust?
The FTC offers advice on coping with debt. Canadians can check out the Canadian Association of Credit Counselling Services.
BBB conducted a study on credit repair and debt relief that contains helpful tips and advice on avoiding scams.
Debt consolidation
Debt consolidation companies offer loans to pay off debts all at once. People may get drawn in by promises of a low-interest loan, but once they've gone through the application process, they could encounter higher fees. Depending on the situation, some people may also be able to consolidate and pay off debt through a second mortgage or home equity line of credit. However, be very careful as this requires the home to be used as collateral.
Who can you trust?
Find BBB Accredited debt consolidation services that have pledged to be trustworthy and uphold the BBB Standards.
Credit repair companies
Credit repair companies promise to clean up credit reports for a fee. You have the right to correct inaccurate information in your file, but nobody can remove accurate negative information. Only time and conscientious payments will repair your credit report.
Who can you trust?
Work with a BBB Accredited credit repair services company so you get advice from a company that values trust. Look for the BBB Seal - it’s the Sign of a Better Business.
Be aware of scams by reading BBB’s investigation of credit repair companies that fail to deliver on their promises.
When worried about debt, people are often vulnerable to promises of fast solutions.
Here are some red flags to help avoid companies with questionable practices.
- Fees charged before your debts are settled
- Pressure to pay fees masquerading as "contributions"
- Impersonations of a government program
- "Guarantees" to make debt go away or improve a credit score quickly
- Directives to stop paying debts and communicating with creditors
- Requirements to provide personal financial information to get additional information
- Promises about what they can do without actually reviewing the financial situation
- Offers a Debt Management Plan without budgeting and money management education
- Promises that the company can erase bad credit or remove information from your credit reports
Before signing up for any program, research the business offering the financial service. Check for a business review and read the complaints on the company at BBB.org. Contact the state’s Attorney General, the Financial Consumer Agency of Canada, and the Federal Trade Commission for additional information.
In the US, you have rights and are protected by the Credit Repair Organization Act (CROA), enforced by the FTC. Legitimate companies adhering to the Act must provide:
- A written contract detailing your rights and the services to be performed
- A three-day cancellation period with no charges
- Details on how long it will take for you to get results
- An accounting of all costs and fees
- Any guarantees that they are making through their marketing
If you feel like you’ve been taken advantage of by one of these companies, report them to your local consumer affairs office or state’s Attorney General. You can also file a complaint with the FTC or call 1-877-FTC-HELP. The FTC may not be able to resolve individual issues. However, they can take action if there is a pattern of complaints or possible violations.
Credit repair is under provincial jurisdiction in Canada, and the appropriate Provincial Government Department should be consulted.
More information for US consumers
More information for Canadian consumers
- BBB Scam Tracker
- Office of the Superintendent of Financial Institutions
- Competition Bureau
- Credit Counselling Canada
- Government of Canada - Canadian Anti-Fraud Centre
- Canada's financial basics and financial toolkit
- Learn more about your banking rights and protections in Canada.
- Read about financial wellness in the workplace for Canadians.
