Credit Repair and Debt Relief Services: What’s the Difference?

The promises of debt relief, low-interest loans, and magic credit score fixes that arrive in your mailbox or email are tempting, but it’s important to know the service difference. and what is the best way to get out of debt.

What is the difference between credit counseling, debt relief, debt consolidation and credit repair?

credit advice is the most comprehensive solution, focusing on a variety of resources to help solve financial problems. It also requires the most work and does not promise immediate relief. Tools include budgeting, educational programs, access to counselors and a personalized plan. Credit counseling can (but not always) lead to a debt management plan (DMP) where funds are deposited into an account and the agency pays debts from that account.

The US Department of Justice has a list of agencies for people seeking debt reduction assistance and Canadian non-profit credit counseling agencies are also available.

Debt relief or settlement companies provide help in renegotiating the debt so that the person does not owe as much. These companies reach out to creditors and work with them to reduce the balance, interest rates or fees. Consumers can also do this to avoid fees charged by a company like this.

Debt Consolidation companies offer loans to pay off all debts at once. People will often be lured by promises of a low interest loan, but once they go through the application process they will find that the fees are higher. Depending on the situation, some people may also be able to consolidate and pay off debt with a second mortgage or home equity line of credit, but be very careful as this requires the home to be used as collateral.

Credit repair companies promise to clean up credit reports for a fee, but the chances of them doing anything that account owners couldn’t on their own are slim. You have the right to correct inaccurate information in your file, but no one can delete accurate negative information. Only time and conscientious payments will truly repair the credit report.

When worrying about their debts, people are often vulnerable to promises of quick fixes. Here are some red flags to avoid companies with questionable practices.

  • Fees are charged before your debts are settled
  • Added pressure to pay fees disguised as “contributions”
  • The company is trying to look like a government program
  • “Guarantees” to eliminate debts or quickly improve a credit score
  • You are told to stop paying your debts and communicate with your creditors
  • You cannot obtain additional information without providing personal financial information
  • Promises about what they can do without actually reviewing the financial situation
  • Company offers debt management plan without teaching budgeting and money management
  • Promises that the company can erase bad credit or remove information from your credit reports

Before enrolling in a program, research the company that offers the financial service. Find a review of the company and read complaints about the company on Contact the State Attorney General, the Financial Consumer Agency of Canada and the Federal Trade Commission for more information.

In the United States, you have rights and are protected by Credit Repair Agencies Act (CROA), enforced by the FTC. Legitimate companies adhering to the law must provide:

  • A written contract detailing your rights and the services to be performed
  • A free three-day withdrawal period
  • Details on how long it will take you to see results
  • Accounting for all costs and fees
  • All the guarantees they make through their marketing


If you believe you have been taken advantage of by one of these companies, report them to report it at and to your local Consumer Affairs Bureau or State 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, if there is a pattern of complaints or possible violations, it may take action.


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