If you want to improve your credit score you’ll have to show you can handle credit responsibly—and, used properly, the right credit card can assist in rebuilding bad credit.
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Conventional wisdom may lead you to believe that if you have bad credit, you should swear off credit cards. But if you want to improve your credit score you’ll have to show you can handle credit responsibly—and the only way to do that is (you guessed it) to have a credit card. Used properly, it can actually be a helpful tool to assist in rebuilding bad credit—and, luckily, there is a whole host of products catered to people with poor credit scores. While these often come with higher interest rates and lower spending limits, they can be a good starting point to re-establishing a good credit score, which in turn will help you get approved for loans, a line of credit, or even a mortgage down the line.
| Card | Details | Annual fee |
|---|---|---|
| Home Trust Secured Visa (No Fee) (get more details)* |
|
$0 |
| Home Trust Secured Visa (get more details)* |
|
$59 |
| Capital One Low Rate Gold Mastercard (get more details) |
|
$79 |
| No-Fee Scotiabank Value Visa (get more details) |
|
$0 |
| Refresh Secured Visa (get more details)* |
|
$49 |
When selecting a credit card to rebuild your credit score, you’ll need to choose between a secured and unsecured product. A secured credit card is one that’s offered on the condition that you “secure” it with collateral, usually in the form of a refundable deposit that can be claimed by the lender if you default on your payments. These cards are marketed directly to those with bad credit (so they have an easier approval process, and come with no frills), but they work—lenders report back your activity to the credit bureau which builds up your score as you continue to repay responsibly.
While not generally available to those with bad credit, unsecured cards are occasionally offered to consumers with “fair” credit scores (generally in the 600 to 650 range). As the name suggests, an unsecured card doesn’t require a deposit, and so it might seem like an obvious choice. Plus, unlike secured cards, many unsecured credit cards offer rewards (think travel points or cash back). That said, they can command tougher approval requirements than unsecured cards. It’s always a good idea to read the fine print when selecting your product.
Home Trust Secured Visa (No Annual Fee)*
The Home Trust Secured Visa stands out because it’s a secured credit card that has no annual fee. To open an account, a $500 deposit is all you need to put down. And while the interest rate is standard at 19.99%, this won’t kick in unless you carry a balance—and if you’re looking to build your credit, you should aim for that not to happen. As with other secured credit cards, you can improve your credit score by making payments on time, preferably in full. Note that if you don’t use your card at least once every 12 months, you’ll be subject to a $12 inactivity fee, so make to charge at least one purchase to the card annually.
Note: This card is not available to residents of Quebec.
Get more details about the Home Trust Secured (no fee)*
Like the Home Trust Secured Visa above, this low interest option is a secured card that can be opened with a deposit of as little as $500—and if you need a higher credit limit, you can deposit more, up to $10,000. The difference with this card is that for a $59 annual fee you can access the much lower interest rate of 14.90% on card purchases, which will save you money should you find yourself having to carry a balance. You also have the option to pay the annual fee in a lump sum or in installments. Be aware, though, that the card carries a $12 inactivity fee for accounts unused for a year. Most applicants are approved for his low interest card.
Note: This card is not available to residents of Quebec.
Get more details about the Home Trust Secured (low interest)*
Capital One Low Rate Gold Mastercard
The Capital One Low Rate Gold Mastercard is a solid choice for people with a low credit score. For a fee of $79 per year, cardholders get a competitive 14.9% interest rate and access to a few perks including price protection, travel benefits and insurance.
If you don’t qualify for the unsecured Capital One Low Rate Gold, Capital One will still approve you for their alternative secured product, the Capital One Guaranteed Secured Mastercard—which makes for a good fail-safe and helps people access a credit card with a security deposit as low as $75 and a $59 annual fee.
No-Fee Scotiabank Value Visa
Although you must have an income of at least $12,000 per year, no recent history of declaring bankruptcy (within the past seven years), and qualify for a minimum of a $500 credit limit, this card’s low interest rate of 16.99% on purchases, and no annual fee, are attractive for an unsecured card—and perfect for those with a low credit score. And, for accounts opened by October 31, 2020, there’s an introductory 3.99% interest rate on balance transfers for six months, so you can take the opportunity to pay down debt accumulating in higher-interest accounts.
The Refresh Secured Visa is in line with the other cards on this list in terms of its interest rate (17.99%), but it earns its place on the list for two distinct reasons. First, you’re guaranteed to be approved without a credit check, which means you can avoid further damage to your credit score. And, second, with its Financial Intelligence Training—a free, online educational program—it offers further tools for those with bad credit to improve their financial picture. (As an added bonus, you can earn $100 each time you refer someone you know to sign up for the card, which isn’t going to dig you out of debt on its own but is a nice incentive.)
| Credit card | Annual fee | Best | |
|---|---|---|---|
| 1 | Home Trust Secured Visa | $0 | Secured card with no annual fee |
| 2 | Home Trust Secured Annual Fee Visa | $59 | Secured card for low interest |
| 3 | Capital One Low Rate Gold Mastercard | $79 | Unsecured card for bad credit |
| 4 | No-Fee Scotiabank Value Visa | $0 | No fee unsecured card for bad credit |
| 5 | Refresh Secured Visa | $48.95 | Honorable mention |
Once you’ve chosen a card, it’s time to rebuild your credit. Remember that as time passes and you use your credit responsibly, the credit bureau will automatically adjust your score. Here are some other rules to keep in mind:
If you’re struggling under the burden of a bad credit score, finding an appropriate credit card can be a strong first step. With consistent and responsible use, you can rebuild up your reputation and, over time, access the financial benefits you need.
If you’re a newcomer to Canada, your credit score from your home country won’t follow you here. While your credit card choices may be more limited, this also means you can start building a new score from scratch which, for some, can be a positive. One way is to use a secured card to help you get started with the goal of graduating to a better, unsecured card.
Another way to build your Canadian credit score might be through a program for newcomers at one of the banks. For example, Scotiabank’s StartRight program is designed specifically for newcomers to Canada, providing access to credit, a savings account, no-fee international money transfers, and help from the bank’s financial advisors. Similarly, BMO’s NewStart Program can issue you a credit card, bank account, safety deposit box and even mortgage options.
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