If you have a poor or bad credit score, a secured or unsecured credit card designed for rebuilding credit can help turn your finances around.
While you generally don’t need a great credit score to apply for a prepaid card you can use for everyday shopping online, credit card issuers are a lot stricter.
Lenders look at your credit history and usually won’t approve your credit card application if your credit score is below 660.
That said, there are financial institutions in Canada that offer secured, unsecured, low-interest-rate cards, and even guaranteed approval credit cards to people with bad credit.
This article covers the best credit cards for rebuilding credit or establishing credit in Canada.
Secured and Unsecured Credit Cards for Bad Credit
A secured credit card requires that you make a security deposit before you can access credit.
The security deposit acts as collateral and is equivalent to your credit limit. This lowers the risk of default faced by a lender if you are unable to pay off your balance.
When you no longer need the card, you can close your account and get your deposit back.
An unsecured credit card does not require a security deposit; however, you must meet minimum requirements including a good credit score.
Both secured and unsecured credit cards report your activity to the credit bureaus. This can help build or rebuild your credit if you use the card responsibly.
Best Credit Cards to Rebuild Credit
There is a high degree of probability that you will be approved for some of the cards on this list.
1. Plastk Secured Credit Card
Annual fee: $48, plus a $6 monthly maintenance fee.
Interest rates: 17.99% for purchases and 21.99% for cash advances (0% purchase APR for first 3 months).
Security deposit: $300 to $10,000.
Rewards: Earn rewards points on everyday purchases; 5,000 sign-up bonus points.
The Plastk Secured Visa* Credit Card is one of the best secured cards for those with bad credit.
You can apply for a credit limit of up to $10,000 and can easily make payments to settle your balance using Interac e-Transfer.
Unlike traditional secured cards that offer no rewards, the Plastk Secured Credit Card offers the following perks:
- 0% APR for first 3 months
- 5,000 bonus points ($20 value)
- Rewards points when you pay with your card
- 25 days interest-free grace period for purchases and 3 days for cash advances
- Referral program
You can redeem your rewards points as a statement balance or redeem them for merchandise, gift cards, travel, charitable donations, and more.
This card has a $48 annual fee. After adding the $6 monthly maintenance fee, it costs $120/year.
Get the Card or read my Plastk Secured Credit Card review.
2. Home Trust Secured Visa (No Fee)
Annual fee: $0
Interest rates: 19.99% for purchases and cash advances.
Security deposit: $500 to $10,000 depending on your credit limit.
Rewards: None; purchase protection.
The no-fee Home Trust Secured Visa can help you rebuild credit without the inconvenience of annual fees.
Cardholders can choose what their credit limit is based on how much they provide as a security deposit, with a minimum amount of $500 and a maximum of $10,000.
Note that if you carry a balance beyond the grace period, a 19.99% purchase rate applies.
Get the card or read my Home Trust Secured Visa review.
3. Refresh Financial Secured Card
Annual fee: $12.95, plus a $3 monthly maintenance fee.
Interest rates: 17.99% of purchases and cash advances.
Security deposit: $200 to $10,000.
Rewards: N/A.
The Refresh Financial Secured Card has a total fee of $48.95 per year.
Depending on your security deposit, you can get a credit limit of up to $10,000 and easily qualify for the card without a credit check.
Refresh Financial also offers a secured personal loan for those with bad credit.
Learn more in this Refresh Financial Secured Card review.
4. Capital One Guaranteed Secured Mastercard
Annual fee: $59.
Interest rates: 19.8% for purchases and balance transfers; 21.9% for cash advances.
Security deposit: $75 or $300.
Rewards: N/A.
This guaranteed approval card can help you rebuild credit or establish one.
To qualify, you must:
- Be at least the age of the majority in your province
- Not have applied for a Capital One credit card more than once in the last 30 days or have had a Capital One account that was not in good standing in the last year
- Not have an existing Capital One account or a pending application for one
- Provide a security deposit ($75 or $300)
Read this review of Capital One credit cards.
5. Home Trust Secured Visa (Low Rate)
Annual fee: $59.
Interest rates: 14.90% for purchases and 19.80% for cash advances.
Security deposit: $500 to $10,000.
Rewards: Purchase protection.
The low-interest-rate version of the Home Trust Secured Visa Card has a $59 annual fee that is counterbalanced by a 14.90% purchase APR.
You can apply for a credit limit of up to $10,000.
Cardholders enjoy purchase security which protects eligible items against theft or damage for up to 90 days following purchase.
Best Unsecured Credit Cards To Rebuild Credit
If you have a good credit score i.e. a credit score above 660, you may qualify for an unsecured credit card that has a low interest rate.
The benefit of a low-interest credit card is that you can transfer your credit card debt at a lower rate and save on interest fees.
6. Scotiabank Value Visa Card
Annual fee: $29.
Interest rates: 12.99% for purchases, cash advances, and balance transfers.
Security deposit: None.
Rewards: N/A.
If you carry a balance from month to month, the Scotiabank Value Visa’s low interest rate can help you save on fees. It also offers a 0.99% promotional balance transfer rate in the first 6 months.
The minimum credit limit for this credit card is $500 and supplementary cards are free.
Cardholders can save up to 25% on car rentals at participating AVIS and Budget locations.
7. RBC Visa Classic Low Rate Option
Annual fee: $20.
Interest rates: 12.99% for purchases and cash advances.
Security deposit: None.
Rewards: Purchase protection and extended warranty; save on fuel at Petro-Canada.
This card requires a good credit score, however, if you are trying to pay off your credit card debt, it can help you save on interest.
You pay a $29 annual fee (free supplementary cards) and a low 12.99% interest rate (compared to 20% or more).
Cardholders can save 3 cents per litre of gas purchased at Petro-Canada while also earning more Petro-Points.
How To Improve a Bad Credit Score
Your credit score is a three-digit number ranging from 300-900. It tells lenders how creditworthy you are and is a summary of the information on your credit report.
Here’s how credit scores are ranked in Canada:
- 300 – 559: Bad credit score
- 560 – 659: Poor credit score
- 660 – 724: Good credit score
- 725 – 759: Very good credit score
- 760 – 900: Excellent credit score
It is difficult to get approval for credit when you have a poor or bad credit score. When you do get credit, the interest rates are significantly higher and/or you may need to provide collateral (security deposit).
In order to improve your credit score, you must understand how your credit score is calculated.
The main factors impacting your score are:
- Your payment history
- Your credit utilization i.e. what you owe compared to your credit limit
- Length of your credit history
- Recent hard inquiries on your credit profile
- Type of credit you have
Your payment history has the most impact on your credit score and makes up about 35% of the calculation.
To increase your score, you should make payments on time. If you have delinquent accounts or those that have gone to collections, it lowers your credit score.
Aim to keep your credit utilization below 35%. For example, if your credit limit is $1,000, your outstanding balance should not exceed $350 on average.
The longer you have had a credit facility (e.g. credit card or line of credit), the bigger the influence they have on your score.
When lenders pull your credit records in order to assess a new credit application, it may impact your credit score.
You can check your credit score for free.
Very useful, thanks Enoch!
Steve