Dealing with your debts through an accredited credit and debt counsellor can improve your long term credit risk.
A recent study released by the Canadian Association of Credit Counselling Services showed that consumers who repaid their debt with the assistance of a credit counselling Debt Management Plan proved to have a better improvement in their overall credit risk scores than the average Canadian.
Your credit score is what lenders use to assess how risky it is to loan you money. While a perfect score is 900, in Canada the credit score for the average Canadian is around 700. Anything below 500 is considered an unsafe credit risk, scores between 575 and 649 are considered ‘average’ risk and scores above 750 are generally considered the safest borrowers. In the study, indebted consumers had an average risk score of below 560 before completing their credit counselling program. After completion of the Debt Management Plan, their scores improved to 636 in just two years.
So how can paying off your debt through a not-for-profit credit counselling agency or a certified debt professional including bankruptcy trustees help? By offering education around debt and financial management as part of the debt repayment process, individuals and families:
- understand what caused their financial problems in the first place;
- learn how to manage their money better;
- develop skills on how to budget;
- gain a better understanding of how to use credit wisely; and
- improve their overall finances.
How quickly and how far your credit score will improve will depend upon which debt relief program you choose and your own individual situation however it is clear that taking control of your debts has a positive result. If you would like to gain relief from overwhelming debts, and put yourself on a path to improving your overall credit score, contact a debt professional today to see which program is best for you.