Credit Counseling Credit Counseling or Debt Counseling as it's called in some cases is basically guidance given to somebody with bad credit or who is in debt, on how they can best go about paying back what they owe or how they can prevent their debt from escalating. This is done through expert budgeting and careful planning. It is now a very common occurrence in today's fast paced consumerist society for people take out loans that they simply cannot pay back or to use credit cards to buy things that they do not have the money for. This offset of borrowed money has caused problems in many of the world's leading economies and is known as the credit crunch. It is becoming less and less feasible to give out loans or credit because the money is not getting paid back. Overspending on credit cards is a very real issue and in some cases is considered an addictive illness. In Canada there are several companies and non profit organizations that offer credit counseling to consumers who have found themselves in un-repayable situations, fear that their debt may be heading that way or just want some information on the best way to handle debt before it happens. In a lot of cases, simply sitting down for a few hours and getting bills and finances in order so they can be worked out on paper is all that is needed. Most Canadian debt counselors are not restricted and offer their services to any legal citizen. In a usual scenario a desperate consumer will contact a credit counseling organization and explain their specific situation, giving details on how much they owe and to whom. On behalf of the consumer the organization will then contact the creditor(s) and negotiate what is known as a Debt Management Plan or DMP. This may involve cutting down the payment to a more realistic and manageable amount, reducing fees and interest rates so they don't overpower what money's coming in and discussing a more suitable timeframe or basis in which the consumer must make the new payment. People that enter in to a debt management plan are usually restricted in some way from borrowing any more money and adding to the problem. If a consumer has multiple payments of debtors to pay the credit organization may implement the well marketed method of debt consolidation – taking numerous monthly payments all coming out on different and confusing dates in to one main monthly payment which is easier to control. The main benefit of credit counseling is giving the consumer a more realistic debt period. For example cutting their repayment from twenty years to that of five, giving them the hope that payment is actually possible. The most common percentage of payment reduction is around 15% although it is often advertised at being 50%, which only seems to occur in extreme cases. The FCAC has made it known that if a Canadian citizen undertakes credit counseling it will be marked on their credit report for at least 2 years, which can prevent them from borrowing during this period.