Having a poor credit score can be frustrating when you want to apply for a credit card. Most credit cards will check your score before they accept your application. They may determine that you pose too much risk if you have a low score.
Even worse, the fact that they carry out a hard credit check can hurt your score.
But what exactly is a bad credit score? How can you improve it? And what are the best credit cards to apply for if you have a bad score?
We cover everything you need to know in this guide.
What is a Bad Credit Score?
But what is considered a “bad” score?
In general, creditors look for a score of about 660 or above. This is considered a “good” score, so anything below this could be considered a “bad” score.
However, just below 660 would normally be considered a “poor” score rather than “bad.” Usually, below 560 would be considered a “bad” credit score.
Another issue is that you may have no credit score if you have never had access to credit of any kind. This lack of credit history can also lead to you being turned down for a credit card.
A bad credit score does not prevent you from getting a credit card. As you can see from the cards listed below, options are still available even if you have bad credit.
Start by researching suitable credit cards explicitly marketed towards people with bad credit. Then, go over all the application requirements (income, residential status, etc.) and decide whether you meet the criteria. If so, apply for the credit card online.
If you are looking for instant approval credit cards for bad credit in Canada, several cards have very high approval rates. This can give you more confidence when making an application.
Alternatively, use a prepaid card, preferably one that helps you to build your credit score as you use it.
Or you may want to apply for a card like Koho and join the credit builder program. While a cost is involved, it is easy to build your credit score. When your score is higher, you may find you have more options when it comes to applying for a credit card.
You could also focus on building your credit score another way, like paying back bills on time and reducing your credit utilization.
One thing to avoid is applying for several cards one after another because this can hurt your credit score. Instead, it’s better to research your options carefully and apply for a card where you know you have a good chance of being accepted.
What to Look for in a Bad Credit Score Credit Card
Bad credit score credit cards are available and may be an option for you, whether secured credit cards or prepaid cards with a credit builder feature.
But what should you look for?
- Interest Rates – Credit card interest rates can be high. Compare the APR for standard purchases and cash advances when choosing your card.
- Fees – Many cards come with additional fees like an annual fee or fees for premium features. Make sure you include these when working out the cost of the card.
- Credit Builder Features – Find out whether the card company reports your payments to a credit bureau or has the option of an additional credit builder program, and check out much this costs.
- Rewards – While rewards are not as common when using cards for bad credit, cashback may be available on some that can help you to save money on your spending.
- Additional Features – Some cards come with apps with useful features like tracking your spending or saving money.
- Requirements – Make sure you check whether there are any minimum income requirements or additional requirements before you apply.
- Credit Checks – Find out whether the card provider will check your credit score when you apply. You may prefer to choose a no-credit-check credit card.
If you have a poor credit score and want to find a suitable credit card, here are some you might want to consider.
Neo Secured Mastercard
Rewards: Get an average of 5% cash back at 7,000+ locations.
Welcome offer: 15% welcome bonus cash back on your first purchases; $25 cash bonus.
Interest rates: 19.99% – 24.99% for purchases.
Annual fee: $0
Neo Secured Credit Card is one of the most popular options in Canada for people with bad credit. It has no annual fee or minimum income requirement, and no credit check is made when you apply.
If you are looking for guaranteed approval credit cards for bad credit, Neo could be an option because it claims to provide guaranteed approval. However, this depends on you meeting the requirements.
It has a purchase APR between 19.99% and 24.99%. There is a $50 minimum deposit, which is not too much, and you can increase your limit or decrease it when you need to.
Neo offers a 5% average cash back and a welcome bonus of up to 15% cashback. Other perks include insurance and app subscriptions, and unlimited cashback rewards (at partner stores). It doesn’t come with annual fees or over-limit fees.
You can also access the insights dashboard to see what you are spending money on. And there is an auto-pay feature, so you don’t miss any payments.
KOHO Prepaid Mastercard
Rewards: Earn 1% cash back on groceries and bill payments; Up to 5% cashback at select partners; Earn interest on your balance*.
Welcome offer: Get a $20 bonus when you load and make your first purchase (use promo code CASHBACK during sign-up).
Interest rate fee: 0%
Annual fee: $0
While getting a credit card for bad credit with no security deposit can be tricky, you might want to get a prepaid card instead. KOHO offers a prepaid card with no annual fee, income, or credit score requirements.
The no-fee KOHO account also provides unlimited instant cash back and up to 5% extra cash back for shopping at its partners. It also has a useful app that provides spending insights and a savings plan.
While not a credit card, it does have an optional credit-building feature for $10 per month. With this, you make your monthly payments, and KOHO reports these to a credit bureau, and you can see your credit score as it is updated.
On average, KOHO Credit Building subscribers increase their score by 20 points within 6 months.
KOHO also offers a Premium account that comes with a financial coaching service to help you regain financial balance. It also offers 2% cash back on essential categories like groceries and transport. This costs $9/month or $84/year.
Tangerine Money-Back Credit Card
Rewards: Earn up to 2% unlimited cash back in up to 3 spending categories and 0.50% on all other purchases.
Welcome offer: Get an extra 10% cash back on up to $1,000 in spending in the first 2 months ($100 value).
Interest rates: 19.95% for purchases, balance transfers, and cash advances.
Annual fee: $0
This unsecured credit card is available for people without a good credit score. However, getting your application accepted may be more difficult because it is unsecured.
It has an $0 annual fee and a minimum income requirement of $12,000. The APR is 19.95% for purchases and cash advances.
Tangerine offers up to 2% cash back on spending and 15% extra cashback for the first two months. You can choose three categories from a list of 10 to get 2% cashback; otherwise, the rate is 0.5%.
It also offers 1.95% on balance transfers for new cardholders for the first six months, plus extended warranty coverage. You can also track your spending in the app.
Home Trust Secured Visa
Rewards: Earn points you can redeem for cash.
Interest rates: 14.90% on purchases; 19.80% on cash advances.
Annual fee: $59.
Credit limit: $500 to $10,000.
Credit score required: Poor or bad credit score.
This secured credit card is targeted at people without great credit scores. There is no annual fee or minimum income requirement, but you cannot be in bankruptcy to apply and must have an income source.
Purchases and cash advances have an interest rate of 19.99%, and you must make payments just like a normal card. There is also the option of a card with a $59 annual fee and a lower interest rate of 14.90%.
You put down a security deposit, and this determines your credit limit. The minimum deposit is $500, and you get your security deposit back when you close your account.
Home Trust also reports your payments to both credit bureaus, helping you build your credit score.
Plastk Secured Credit Card
Rewards: Earn points you can redeem for cash.
Welcome offer: 5,000 bonus points and 0% APR for 3 months.
Interest rates: 17.99% on purchases; 21.99 on cash advances.
Annual fee: $48, plus a $6 monthly maintenance fee.
This is another option if you want a secured credit card. It has an annual fee of $48 and a monthly maintenance fee of $6, which is a total of $120 a year, so it is not the cheapest card.
Like other secured cards, you must make a security deposit, which is returned when you close your account. There is no minimum income requirement, and it claims to provide guaranteed approval if you meet the eligibility criteria.
The purchase APR is 17.99%, which is competitive. However, if you make two minimum payments late, you will be charged a higher interest rate of 29.99%.
Plastk also has a good rewards program, which is not common with secured credit cards. For example, you can earn 250 Plastk points every time you spend $1. You can also get a welcome bonus of 5,000 points and 0% APR for the first three months.
Plastk Sentinel is a premium service costing $15.99 a month. With this, you can monitor your credit score and access financial education.
How to Improve Your Credit Score When You Have Bad Credit
You can do various things to improve your credit score if you have bad credit.
1. Reduce Credit Utilization
If you have other credit cards or loans, pay back as much of your balances as possible so you only use 30% or less of your total credit limit.
This is called utilization; a lower utilization is better for your score.
2. Always Pay on Time
As well as paying back your loans on time, always pay your bills on time, including your cell phone bill.
3. Avoid Applying for Lots of Credit
Avoid applying for several credit cards or loans in a short period. This can harm your score.
4. Use a Secured Credit Card
With a bad credit score, you are less likely to be successful in applying for unsecured credit cards. But you may be able to apply for a secured credit card.
Finding credit cards for bad credit with no deposit required can be difficult. But with a secured card, you have to provide collateral, usually a deposit. Then, if you fail to make your payments, the lender can use your deposit, so there is less risk for them.
As such, secured credit cards are often an option for people with bad credit. You can improve your credit score by using a secured card and making monthly payments on time.
5. Join a Credit Building Program
Some credit cards for poor credit, like that from KOHO (see below), also have optional credit-building programs.
With these, your payments are reported to the credit bureaus every month. So you can build your credit score if you make your payments regularly.
If you have negative information on your credit report, this will typically stay for six years. But that is not a set rule, and it could stay longer or shorter.
There are many options for secured credit cards and prepaid cars. Check the cards in this guide for a starting point. Finding an unsecured credit card for bad credit in Canada is less common, but there are options depending on your credit score, like the Tangerine Money-Back Credit Card.
There are various things you can do if you want to improve your credit score, like joining a credit builder program. Some of these require a fee, like the one offered by KOHO. But you cannot exactly pay to fix your score because you will have to take specific actions like making monthly payments on time.
This always depends on the borrower’s situation, including their credit score and other factors. If you meet the requirements and have a good credit score, you may find that many banks are relatively easy to get approved. But if you have a bad credit score, a secure credit card or prepaid card like those mentioned in this guide may be better.
Just because you have a bad credit score does not mean you cannot get a credit card. Most unsecured credit cards will be harder to get, especially if your score is low. But secured credit cards may be an option.
Use the information in this guide to apply for your credit card. If you get accepted for a credit card, remember to make your payments on time every month. This will help you improve your credit score so that you will have more options when you apply for a credit card.