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 credit worthiness. 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. That being said, it is worth checking your credit score as it might be higher than you think.
So, how do you go about building (or rebuilding) your credit history? There are lots of credit cards for bad credit, 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.
To see how cards fit with your individual spending profile, compare multiple cards side-by-side with our credit card rewards calculator.
Ratehub.ca’s best credit cards in Canada for bad credit
- Best secured card: Home Trust Secured Annual Fee Visa Card
- Best no-fee secured card: Home Trust Secured Visa Card
- Best low interest credit card: Scotiabank Value Visa
Best secured card
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 be able 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. It comes with a low interest rate of 14.9% on all purchases (19.8% for cash advances), which makes it a good choice for those looking to re-establish their credit rating and who trust themselves to not often carry a balance. 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
If you rather not pay an annual fee, the Home Trust Secured Visa Card might be a good option. The primary difference between the two cards is the no-fee card comes with a higher interest rate (19.99%) for purchases and cash advances.
Best low interest credit card
It is 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, it is possible that you might qualify for a low-interest credit card and may not need a secured credit card to (re)build your credit.
The Scotiabank Value Visa isn’t a secured credit card, so it doesn’t require you to put down a security deposit that acts as your credit limit. With an incredible 6-month introductory interest rate of 0.99% on balance transfers, this card is by one of the most effective ways to pay off any outstanding credit card balances.
The Scotiabank Value Visa is an excellent choice for Canadians looking for a low-interest credit card that extends that low interest rate to cash advances and balance transfers. With this credit card you’ll pay 11.99% interest on all purchases and cash advances, and for the first six months you’ll pay just 0.99% on balance transfers, and 11.99% after that. These low interest rates will cost you $29 per year.
To apply for this credit card you’ll need an income of at least $12,000 per year, and you must be a resident of Canada. If you use this credit card to book a car rental through AVIS, you’ll enjoy a discount up to 20%. This is a good card to graduate to once you’ve improved your credit score using a secured credit card and proved you can be relied on to pay off your credit card balance on time every month. If you think you’ll occasionally carry a balance on your credit card from month to month, the best low-interest credit cards are the way to go.
- The Best Credit Cards in Canada for 2018
- How To Use a Credit Card to Rebuild Bad Credit
- 3 Ways to Pay Off High-Interest Credit Card Debt