Your credit history is what lenders use to determine your creditworthiness. Your past financial history judges how likely you’re able to repay your debts in full and on time. If you have a poor credit history or no history at all, lenders may not trust that you’ll be timely and consistent in your repayments. You can improve your credit history by using your credit card responsibly. This will show lenders that you can manage debt well and improve your credit score over time. Whether you have a poor or non-existent credit history, there are still lots of credit card options out there - 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 help you improve your credit, we've gathered the best credit cards to build or rebuild in Canada. 

Best overall (secured) credit card for bad credit

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Having the distinction of being the only secured card on the market to offer cash back rewards, the Neo Card (Secured) offers 5% cash back on purchases made with participating Neo partners and 1% on everything else (up to a $5000 limit per month).  

There’s no annual fee to pay, and its minimum security deposit of only $50 makes it quite possibly the most accessible card on this list. Other great features include the ability to increase or decrease your credit limit on demand, an insights dashboard through their app which you can use to track spending, and an auto-pay feature to ensure you never miss a bill while you’re trying to get your credit on track. 

The only visible drawback here is their purchase interest rate. While its low end sits comfortably at a standard 19.99%, it can reach as high as 26.99% depending on your credit application and province, so read the fine print on your contract and make sure you’re getting a rate you can live with.

Pros:

• No annual fee
• Only secured card on the market with cash back rewards - earn 5% on store purchases with Neo retail partners and 1% on everything else
• Increase or decrease your credit limit on demand
• Insights dashboard helps you keep track of your spending
• Auto-pay feature keeps you from missing bills
• Very low minimum security deposit of $50 
• No hard credit check, excluding Quebec applicants (hard credit inquiries may have a negative impact on your credit score)

Cons:

• Purchase interest rate can go as high as 26.99% depending on your application and home province

Best no fee (secured) credit card for bad credit

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The Home Trust Secured Visa Card is a no-frills card perfect for those looking to build their credit without the added pain of an annual fee. With a minimum deposit of $500, users can activate the card and make purchases virtually anywhere, with Home Trust sending regular reports to both major credit bureaus (Equifax and TransUnion). The card’s interest rate of 19.99% is fairly standard (although there are other secured cards who offer lower rates) and for -those using the card abroad or online, its 2% foreign exchange fee is lower than you’d normally find on a card of this type. 

Those willing to fork out $59 for an annual fee can see their interest rate lowered to a very impressive 14.90%, but that may be a big ask for clients still trying to get on their feet financially. 

While it may not feature any of the perks or rewards of other cards, those who use it responsibly will find it helpful as they build up their credit and graduate to an unsecured credit card in the future. 

Pros:

• No annual fee
• Low foreign exchange fee of 2%
• Reports to both Equifax and TransUnion

Cons:

• Interest rate of 19.99% is standard for most credit cards, but there are cards with lower interest rates on the market right now
• Interest rate of 14.90% is available, but you’ll have to pay an annual fee of $59 as well
• Very bare bones - users won’t earn any rewards or cash back and there’s no perks

Best rewards (secured) credit card for bad credit

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For those looking to earn rewards while building their credit, the Plastk Secured Visa Rewards Card offers the ability to earn one point for every dollar you spend on the card, earning yourself a dollar back for every 250 points you collect (although you won’t be able to redeem until you’ve amassed 2500 points). They also offer a signup promotion offering 5000 points (a $20 cash value) and 0% interest for the first three months. 

Their purchase interest rate of 17.99% and 25-day interest-free grace period are some of the best available right now, plus you’ll also receive monthly credit score updates via Equifax so you can monitor how you’re doing.

The caveats? It requires a $48 annual fee as well as a $6 monthly maintenance fee, which could scare off clients nervous about parting with that much money up front. Then there’s the hidden fees, such as a $35 charge for dishonoured payments and a 4.5% foreign conversion fee. Not to mention the fact that their attractive 17.99% interest rate shoots up to 29.99% after two missed payments. While responsible card use should eliminate concern for a couple of these things, those inexperienced with credit or trying to overcome bad financial habits may give pause before applying.

Pros:

• Sign up bonus of 5000 points (cash value of $20) and 0% purchase interest rate for first three months
• Ability to earn rewards on purchases
• 17.99% purchase interest rate is one of the lowest available
• 25 day interest-free grace period
• Monthly credit score updates through Equifax

Cons:

• 17.99% purchase interest rate shoots up to 29.99% after two missed payments
• $48 annual fee and $6 monthly maintenance fee could be intimidating to users who don’t want to spend too much on a card
• Hidden charges to watch out for ($35 for dishonoured payments, 4.5% foreign conversion fee)
• Only reports to Equifax

Also consider: 

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.

Two retail credit card options that might be within your reach if you have fair credit are Canadian Tire's Triangle Mastercard and 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.

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 cards from 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

How to get a credit card with bad credit

One of the best ways to rebuild your credit is by getting a credit card. But when most credit cards require at least a good-to-great credit rating for approval, how do you get over that wall? Thankfully, there are options, and many of them ask much less of applicants. For most easy-approval credit cards, you'll only have to meet a few requirements:

• Be a permanent resident of Canada
• Be the age of majority in your home province
• Not carry an existing debt on a credit card with the same company

If you're interested in paying off existing credit card debt, a balance transfer credit card is the perfect solution. These cards come with lower-than-average promotional interest rates (sometimes even no interest at all) and allow you to transfer over your current balance to pay it off with them. If you've got a solid repayment plan in place, you can take care of your debt during the promotional window (usually six to 10 months) without the extra stress of additional interest creeping in. One caveat, however: most balance transfer cards don't apply their promotional interest rate to new purchases, only payments on an existing balance. That means that any purchases you make on the card are going to be subject to it's regular (read: higher) interest rate, so it's worth it to pay off what you owe first.

Another option is a secured credit card, which works just like a regular credit card with one exception: you'll need to make a deposit up front to activate it. This deposit is typically the same amount as your credit limit, and it's used as collateral for the bank in the event that you default on a payment. Because of this, secured cards are very easy to obtain as the risk on the provider's end is minimal. And while this may sound similar to a prepaid credit card, there is one big difference: unlike prepaids, secured credit cards report your payments to Canadian credit bureaus. This means you'll be building your credit score as you make purchases and pay them off responsibly.

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.

Also read:

• 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