As the saying goes, past behaviour is the best indicator of future behaviour. And in that spirit, your credit history is what lenders use to determine your creditworthiness. In other words, they use your past financial history to judge how likely you’re able to repay your debts in full and on time.
If you have a poor credit history or no credit at all, then lenders either don’t trust that you’ll be timely and consistent in your repayments, or they have nothing with which to assess your risk—and lenders aren’t about to give you the benefit of the doubt.
So, how do you go about building (or rebuilding) your credit history?
One of the most effective ways to do so is through a credit card. By using a credit card responsibly, paying your monthly statement on time, and not letting your balance exceed 30% of your card’s limit (or your budget), you’ll prove to credit bureaus and lenders that you can be trusted with managing debt. And that’ll make all the difference to your credit score.
Luckily, even if you have no credit history or have run into credit troubles in the past, there are still lots of credit cards for bad credit in Canada that are easy to be approved for – most of them being secured credit cards. Secured credit cards differ from other credit cards in that they require you to provide a security deposit that’s equal to or greater than the credit limit.
The best credit cards for bad (or no) credit in Canada
|Credit card||Card Details / Who It’s Best For|
|Home Trust Secured Annual Fee Visa Card (VIEW)||
|Home Trust Secured Visa Card (VIEW)||
|Plastk Secured Visa (VIEW)||
|Refresh Secured Visa (VIEW)||
|Have a fair credit rating? Consider these retail credit cards (VIEW)|
Best low interest (secured) card for bad credit
If you don’t qualify for an unsecured credit card, then the Home Trust Secured Annual Fee Visa Card might be a good option for you. This card requires you to pay a security deposit equal to the amount of the credit limit you’d like. You can put down as little as $500 and as much as $10,000. This provides you with the opportunity to build your credit rating up at a rate that you’re comfortable with. If you want to use the card for small purchases to slowly regain creditors’ trust but you still want the freedom to buy those bigger ticket items, this card lets you do just that.
This card is available to all Canadian residents except residents of Quebec and has an approval rating of more than 95%, so you’re almost guaranteed to get one—even if you’ve been bankrupt in the past (so long as you’ve been discharged). The card has an annual fee of $59, which you can choose to pay at $5 per month. Plus, it comes with a low interest rate of 14.99% on purchases, which is considerably lower than the standard APR of 19.99%. That means you’ll accrue less interest in the instance you do carry a balance from one month to the next. Since this isn’t a prepaid card, you can’t use your security deposit to pay off your balance, but once you close your account it will be returned to you in full.
Best no fee (secured) card for bad credit
The Home Trust Secured Visa Card is one of the few secured credit cards in Canada with no monthly or annual fees. So, not only are you virtually guaranteed to be approved for the card upon your credit check (even if you currently have bad credit or were previously bankrupt) you also won’t have to pay anything just for carrying it either.
By using this card responsibly and paying off your monthly bill on time, you can progressively rebuild your credit score. The Home Trust Secured Visa can be used like any other Visa Card, and you can use it to make purchases online or over the phone. It does come with a standard interest rate of 19.99% and a 21-day grace period, which makes it a good choice for those looking to re-establish their credit rating and who trust themselves not to carry a revolving balance from one month to the next.
As is customary with secured credit cards, you will have to put forward a security deposit. The minimum deposit for this card starts at just $500. It’s worth noting, this credit card isn’t available in Quebec and may charge an additional fee in the case you spend over your credit limit.
Best rewards (secured) card for bad credit
Plastk has carved a niche for itself. Whereas most secured credit cards are focused solely on helping those with no or bad credit get their scores up and are bare bones in terms of perks, Plastk delivers in both areas.
Along with being extremely easy-to-get and reporting payment activity credit bureaus, Plastk comes with a welcome bonus and earns rewards on your everyday spending. The welcome bonus includes 20,000 points (worth $20 in cash back), a 0% interest rate for the first three months, and a minimum of 1 point per dollar (the equivalent of 0.4% in cash rewards) on everything you buy.
You won’t need to undergo a credit check when applying for the Plastk Secured Visa Card and you’re virtually guaranteed to be approved. Like all secured cards, you’ll need to provide a deposit as collateral, and with Plastk, your deposit can be as small as $300 all the way up to $10,000 (your deposit will be equal to the size of your credit limit).
Signing up also offers other perks including free credit monitoring, so you keep in the know of how your credit score is improving, as well as access to educational articles and videos about personal finances to learn about how to maintain good credit in the long-term.
Honourable mention: secured card
While you’re almost guaranteed to be approved for any secured card you apply for, you’ll often need to go through a credit check to get one first. That can cause a temporary ding to your credit score, which is something you may want to avoid if you already have bad credit or were recently rejected for another card.
That’s where the Refresh Secured Visa Card stands out – it doesn’t require any credit check, helping to remove any anxiety you may have about the application process.
All your activities on this card are reported to credit bureaus, so you can improve or build your credit history as you make purchases, provided you diligently pay off your balance on time of course. This card has a 17.99% annual interest rate on revolving balances, which while not as low as the aforementioned Home Trust Secured Fee Visa is still lower than the standard 19.99% found of most credit cards. It has a $49 annual fee and a security deposit minimum of only $200.
As an added plus, Refresh cardholders get access to Refresh f.i.t., which is a seven-part online course (complete with videos) that teaches you about money and how to make the best financial decisions for your future. You can also get up to $100 for making a referral.
Honourable mention: unsecured retail credit cards
It’s worth knowing your credit score before applying for a new card (especially if you’ve never checked!) as it might be higher than you thought. If you have a credit score above 600 and no recent history of bankruptcy or consumer proposals, it’s possible that you might qualify for a conventional credit card and may not need a secured credit card to (re)build your credit.
Like many credit cards issued by retailers, the Triangle Mastercard from Canadian Tire has more accessible approval requirements and is easier to obtain when compared to conventional rewards credit cards offered by banks (though, if you don’t have the best credit, you may only be granted a very low limit). The card has no annual fees and no specific income requirements, but you will need to be a resident of Canada, not have reported bankruptcy within the past seven years, and be employed.
The Triangle Mastercard earns up to 4% in Canadian Tire Money at a number of affiliate retailers including Canadian Tire, Sport Chek, and Mark’s clothing store.
Another retail credit card option that might be within your reach if you have fair credit are PC Financial’s Mastercards. Available in three tiers, the entry-level PC Financial Mastercard has no annual fee, no income requirements, and earns PC Optimum points that you can redeem at retailers including Shoppers Drug Mart and Loblaws banner grocery stores.
As a reminder, the two aforementioned retail credit cards are unsecured. So, while you won’t be required to provide a deposit as collateral, you must undergo a credit check and aren’t guaranteed to be approved. That’s in sharp contrast to secured cards which are specifically tailored to people with no or bad credit and have virtually guaranteed approvals, often with no credit checks required.
Retail credit cards are easier to get for a few key reasons – namely because they can encourage cardholders to spend more at the card’s affiliated retailers and often charge higher interest rates and late payment fees. If your goal is to improve your credit, you’ll want to approach using a retail card cautiously by limiting your spending, always paying off your balance in full and on time, and avoid changing your purchasing habits in the pursuit of collecting more rewards. Don’t forget, your ultimate goal is to improve your credit.
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Secured vs. unsecured credit cards
An unsecured credit card is what you picture when you think of a typical credit card – where you submit an application, and the lender uses your income, your credit score, and several other factors to determine your credit limit and whether you’ll be approved. There is no collateral for this credit card, and you pay off your purchases each month, and in some cases, earn rewards like points or cash back.
If you have a low credit score, no credit score, or you’ve been discharged from bankruptcy, you may not qualify for an unsecured credit card. Instead, you can choose a secured credit card.
A secured credit card is guaranteed by a cash deposit – usually one or two times the amount of your credit limit. This deposit secures your loan with your card issuer who will hold it as long as you have your secured credit card. Since secured cards are backed by a deposit, they’re not as risky for lenders, which is why they are accessible to almost everyone including people with bad credit and usually have no income requirements. It’s no surprise then that secured credit cards are the easiest credit cards to get.
You can use your secured credit card just like an unsecured credit card. You can shop online, book travel, and use it for your daily spending. Also, just like an unsecured credit card, you should aim to pay off the balance in full every month.
Secured and unsecured credit cards report their cardholder’s activities to credit bureaus, which means both can be used to build credit history. In contrast, prepaid credit cards and debit cards don’t report activity to credit bureaus and therefore won’t help to build or repair your credit.
What is a bad credit score?
Your credit score is a number used by lenders to determine your trustworthiness as a borrower. It’s a number between 300 – 900, and the higher the score, the better. Many factors go into determining your credit score, such as the age of your oldest credit account, your payment history, the types and size of credit you have, and whether your credit products are often close to their limits.
Most credit card providers require a credit score of at least 600 to qualify for an unsecured credit card, but if your credit score is below that threshold, don’t worry, you can improve it.
How to improve your credit score?
If your credit score is too low to qualify for an unsecured credit card, here are the ways you can improve your credit score:
- Apply for a secured credit card and never miss a payment
- Pay down the balances on any revolving credit agreements (such as your credit card) to less than 30% of the credit limit
- Make all of your payments for services like cell phones and electricity bills
- Keep old credit accounts open to make your credit history longer
- Do not apply for several credit with many different lenders at the same time – this is called a hard inquiry and can decrease your credit score
Ultimately, improving your credit score comes down to demonstrating that you are trustworthy with credit, which means paying off your existing credit tools every month. If you do this, eventually your credit score will improve enough that you will qualify for an unsecured credit card.
Credit card options for new immigrants to Canada
If you’re a new immigrant, your credit score from your previous country won’t follow you to Canada and you’ll have to build your credit history from scratch. That can make everything from renting an apartment to getting a smartphone plan considerably more difficult.
So, if you’re a newcomer to Canada, you’ll want to prioritize building a local credit history. One of the most effective ways of doing so is by getting a Canadian credit card.
While you can consider a secured credit card, some banks have special newcomer programs that let you, as a new immigrant, get an unsecured credit card without having to go through a credit check or a Canadian credit history. That’s good news, as unsecured credit cards often provide access to rewards or better interest rates. One of the most notable of these programs is the Scotiabank StartRight Program.
It’s worth highlighting that not all new immigrants to Canada may be eligible for these programs and you may need to meet certain requirements, such as having a foreign worker or permanent residency status. That said, if you do meet the requirements, you could get a great rewards card. Scotia’s StartRight Program, for example, offers newcomers access to cards like the Scotiabank Gold American Express, which is arguably one of the best travel credit cards in Canada.
It’s important to note that most credit cards in Canada (secure or otherwise) do require Canadian residency status or at least some worker or student visa status.
- The Best Credit Cards in Canada
- What is a Secured Credit Card (and How Do They Work?)
- How to pay off your credit card and reduce interest charges