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  • Credit counselling not only helps solve debt problems, it puts you ahead of most Canadians as a good credit risk.

    by:
    Laurie Campbell

    Listen up my fellow Canadians. Independent research now shows that your best course of action in solving a debt problem is to give us a call here at Credit Canada Debt Solutions (CCDS). That’s right, this isn’t just me, as CEO of CCDS, throwing darts in the dark as a self-promoter. The research comes from one of the world’s largest and most respected credit bureaus. It found that consumers with debt problems who use the voluntary Debt Repayment Program (DMP) we provide become almost two times better as a good credit risk when compared to Canadians who do not use credit counselling services.

    As reported this week, "Equifax Canada analysis shows that consumers who have successfully completed a Credit Counselling Program through an accredited not-for-profit agency demonstrate a significantly improved credit score and lower delinquency rates compared with average Canadian consumers," says Paul Le Fevre, Director of Operations, Equifax Canada. News of the research findings came through our friends at the Canadian Association of Credit Counselling Services (CACCS), of which my agency is a member. Of course, all member agencies of CACCS are celebrating the announcement because we all in essence follow the same service formula.

    The news also ought to perk up the ears of the credit grantors  - the banks, credit card agencies, finance companies et cetera - we liaise with when working on behalf of troubled consumers to solve debt problems. Understand that when we carry out a credit counselling DMP, we work in support of consumers as a go-between with financial institutions and agencies. We help people consolidate all debt into one loan for an easy, affordable monthly payment program that often comes with benefits we negotiate such as reduced or - depending on the severity of the debt problem - even forgiven interest rates. The consumer benefits through a program that also makes lenders happy because rather than seeing their customers disappear into a financial void, they see them rise above their debt problems to become more financially literate and responsible citizens. It’s a simple case of what’s good for the goose is good for the gander. In a nutshell, credit counselling services are proven to help strengthen households, Canada’s lending environment, and by extension our economy at large. The point is, no one wins when people with debt problems go into default. In the worst-case scenario of bankruptcy, the consumer loses through forfeiture of assets and is burdened for a long time with an abysmal credit rating.

    Meanwhile, financial institutions and agencies have to make worrisome write offs, and our Canadian economy at large suffers from a weakened consumer base. As an important side note to all of this, let me just say that at a time when upstart businesses calling themselves “debt settlement services” have sullied the admirable reputation of our country’s debt services industry, we are now presented with hard data showing that our credit counselling services - encompassing a 50-year history - continue to offer superior, trustworthy ways for Canadians to solve debt problems and maintain a balanced financial footing. Blessedly, legislation will soon be introduced in Ontario to restrict “debt settlement services” from dubious business practices.

    It’s already in place in other parts of Canada. Be that as it may, this week's CACCS dispatch explained the credit counselling research study in some detail. “The research data included more than 1,600 Canadian consumers who completed a credit counselling DMP in 2010, and whose credit worthiness was subsequently analyzed at year's end in both 2011 and 2012. The research was informed by the Equifax Consumer Risk Predictor score (CRP), a risk assessment tool based on more than 400 consumer credit file attributes and that predicts the likelihood of 90-day past due credit delinquency within the next 24 months,” according to the CACCS news release. “As part of their lending criteria, credit grantors can use this type of score to assess a consumer's credit risk. Low scores, below 500, indicate unsafe risk due to very serious credit issues while mid-range scores between 575-649 reflect an above average risk profile, the safest risks for lenders ranging from 750-900,” CACCS explained. “Prior to completing the credit counselling DMP, consumers in the control group reflected mostly high risk scores of below 560. But after completing the DMP - and by the end of 2011 - consumers significantly upped their CRP average to 627 (indicating an above average risk profile) and their credit performance continued to improve reaching 636 at the end of 2012.

    Consumers who repay their debt using a DMP are almost two times better - practically doubling the odds - in relation to being a good credit risk when compared to Canadians who did not use credit counselling services,” CACCS said. Clearly, given the work we’re doing to help solve consumer debt problems and promote a healthier lending environment, all of us in the field of not-for-profit credit counselling have good reason to feel especially proud today. So, let’s give a cheer for Canada’s credit counselling services industry! Hip hip, hooray!

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