10 Best Credit Cards for Bad Credit | WOWA.ca (2023)

Credit Cards for Bad Credit Canada

When it comes to finding credit cards for bad credit, Canada is no different from anywhere else. Credit card companies like to see a good credit score and a strong credit history before approving someone for a card.

This makes it difficult for people with bad credit to find a card that will work for them. However, a few excellent credit card options are available for less-than-stellar credit scores. Here are 10 of the best credit cards for people with bad to moderate credit in Canada.

Note: You may be approved for an unsecured card if you have a moderate credit score.

Note: You may be approved for an unsecured card if you have a moderate credit score.

Potential Credit Cards for Moderate Credit Scores (600 - 720)

Some lenders have no stated minimum credit score requirements and occasionally provide cards to borrowers with lower credit scores. While not guaranteed, applicants are assessed case-by-case, and you could be approved if you are strong in another area. Typically this means having a stable income with lowdebt service ratios. Some cards may even have a minimum annual income requirement.

As a result, borrowers with stable, consistent, and predictable incomes with low outstanding debt could qualify even with a lower credit score. You could qualify for one of the following cards if you meet these requirements.

Types of Credit Cards for People With Bad Credit

There are three categories of cards for people with bad credit. If your credit score is decent, you may be eligible for an unsecured credit card. Otherwise, you may be required to use a secured or prepaid credit card. Continue reading to learn the difference between the three types.

Secured Credit Cards

You can think of a secured credit card as lending money to yourself. A secured credit card requires a security deposit, which is usually equal to the amount of credit available on the card. If you miss payments or default on your debt, this deposit acts as collateral. However, you will have to pay interest on your outstanding balance to the credit card company. Additionally, you will not earn any interest on your deposit as you would byinvesting in a GIC.

Secured credit cards are the easiest to get approved for because there is no risk for the card company. They are the last resort because your deposit money could be invested elsewhere. Most people will begin with a secured credit card and then transfer to an unsecured card. With that being said, using a secured credit card is a great way to improve your credit score over time.

Prepaid Credit Cards

A prepaid credit card is different from a secured credit card because you don't need a security deposit. Instead, you load money onto the card in advance and can only spend the amount you've deposited. They act similar to a debit card and some have an additional feature to help you build credit.

Prepaid credit cards are an excellent option for people with bad credit because they're easy to get approved. However, using a prepaid card won't help improve your credit score unless it has an extra credit building feature. For example,KOHO’s credit building featurecosts an additional $7 per month. Without this feature, your credit score won’t improve through using a prepaid card.

Unsecured Credit Cards

An unsecured credit card is the best option for people with bad credit scores. You don't need to put down a security deposit, and you can earn rewards like cash back or points on your purchases. The only downside is that unsecured cards are more challenging to be approved for.

When looking for an unsecured credit card, it's essential to compare the features and benefits of each card. Some cards will offer a lower interest rate or annual fee, while others will give yourewards on your spending. It's crucial to find a card that fits your needs and lifestyle.

Additional Considerations

By now, you have seen thetop credit cardsfor people with bad credit and understand the different types of cards available to you. However, your decision to find the best card might still be overwhelming. We have included additional considerations below to help you narrow it down to the perfect card.

Annual Fee

An annual fee is a charge that is incurred every year for the use of a credit card. Interestingly, many poor credit score cards have yearly and monthly fees. For example, Refresh Financial's secured card has an annual fee of $12.95 and a monthly charge of $3.00.

After building your credit score, it's ideal to keep your credit account open even if you switch to better cards. This is because your credit score calculation includes the average age of your credit accounts. Thus closing your oldest credit account will decrease the average age and negatively affect your credit score. You should prioritize a no annual fee card so you don't have to keep paying the fee to maintain a higher credit score.

However, your credit card company will offer various cards in some cases. In this case, you can transfer your account to a different card from the same company, and it won't affect your credit score. If your company allows this, you can switch from a paid to a free card and leave the account open.

Instant Approval Credit Cards

Most credit card applications take a few business days to receive an answer. This can be nerve-wracking while you wait. Aninstant approval credit cardis an excellent option if you have bad credit and need a card quickly. These cards do not require a credit check and can be approved in minutes. However, they generally have high fees and interest rates.

Guaranteed Approval Credit Cards

Guaranteed approval cards are rare in Canada. Essentially if you meet a set of requirements, you will most likely receive a secured card. Some guaranteed approval cards in Canada includeCapital One Guaranteed Mastercard,Neo Secured Mastercard, andPlastk Secured Visa. They have requirements such as:

• Canadian permanent resident
• Age of majority in province or territory
• Paying the security deposit from your Canadian bank account
• Not currently in bankruptcy or under a consumer proposal
• Have a source of regular income

How to Get a Good Credit Score

Now that you understand how to get a credit card, the next step is rebuilding your score. First, it's essential to know how your credit score is calculated. While this is already explained in detail in ourCredit Score Canada article, you can reference the table below for a quick refresher. Essentially, there are five factors with different weightings. If an element has a more significant weighting, it will impact your score more.

Now that you understand how your score is calculated, you can begin to optimize for the factors. Understand that your score doesn't increase quickly. It can take months or even years to get the best credit score in Canada. Additionally, while it takes time to build your score, it can quickly drop. Be consistent, and don't lose motivation if you slip up. Beginning with the most critical behaviours, you will get a good credit score through the following actions.

1. Always Pay on Time

Around 35% of your credit score is affected by your payment history. One missed or late payment will send your score tumbling. If you are a forgetful person (or want to save time), consider setting up a pre-authorized debit (PAD). A PAD is an agreement between your credit card company and yourchequing accountprovider.

The PAD form can be requested from your credit card company and filled in with your banking information. It will automatically withdraw the required amount from your chequing account and pay off your card. You can pay the entire statement amount or make theminimum payments. Always ensure you make the complete payment to avoid interest charges and keep a low balance. If you always fully pay off your statement, the card's interest rate won't be important.

2. Keep a Low Balance

Credit utilization is the second most crucial factor in your score calculation. It comprises 30% of your total score. Credit utilization is a ratio that compares your current balance to your credit limit. The lower the ratio, the better your score. Ideally, it's best to keep it below 30%.

If you have a $500 credit limit, you should keep your balance below $150. If your balance exceeds the limit, make an early payment to bring the balance below. Credit utilization is calculated on an individual basis for every card. Having multiple cards will allow you to keep a lower balance on each one.

However, applying for multiple cards will affect your score in the short term. Additionally, you will have to manage more cards and ensure you are paying them off in full every month.

3. Don't Close Your Oldest Account

As mentioned earlier in this article, 15% of your credit score is calculated by the average age of your credit history. The longer your record, the better. You can improve this factor by keeping your oldest account open, even if you never use it.

If you have an unused card with an annual fee, some companies will waive the cost if you call and ask. If not, you can request to switch to an unpaid card from the same company. This will allow you to keep the credit account open while removing the annual fee.

4. Have Different Types of Credit

Your credit mix determines 10% of your credit score. You can improve this factor by diversifying your types of credit. For example, if you have only ever had credit cards, try to get acar loan.

You can also improve this factor by having secured and unsecured credit products. Secured products are backed by collateral, such as a car or home. Unsecured products are not backed by anything and includes credit cards and personal loans.

Prioritize keeping a low balance and always paying on time. If you are rebuilding your score, you may not have access to different types of credit. In this case, this factor is not a priority considering the low weighting.

5. Don't Constantly Apply for New Credit

10% of your credit score is impacted every time you make a hard inquiry. A hard inquiry is when you apply for a new credit product, and the lender checks your credit score. Each hard inquiry stays on your report for two years, but its impact diminishes over time.

Inquiries have the most significant impact in the first year. As a result, it's best to space out applications, so you're not constantly getting new inquiries. If you apply for multiple products in a short period, try to do it within a 14-day window. This is because inquiries made within this window are grouped as one inquiry.

Bonus: Check Your Report Regularly

You are entitled to one free credit report from each of the two Credit Reporting Agencies (CRAs) every month. It's essential to check your information regularly to ensure no errors. If you find an error, you can dispute it with the credit bureau and have it removed from your report.

You can access your free credit report by visiting the websites ofEquifaxand TransUnion. Additionally, there are free websites to check your credit score, such as Credit Karma.

Credit Cards for Students

Students in Canada will have a tough time applying for credit cards without a credit history. Fortunately, many banks provide student credit cards to address this issue. Their goal is to become your go-to bank as you age.

Student credit cards are often no-frills cards with a low credit limit. It's common for your first credit card to have a limit of around $500 to $1,000. Additionally, they will have low or no income requirements. Remember to keep your credit balance below 30%. Some of the best student cards to help you build credit include:

BMO Student Credit Card



RBC Student Credit Card



TD Canada Trust Student Credit Card



CIBC Aventura for Students



Scotiabank Scene for Students

Credit Cards for Recent Immigrants

If you are a recent immigrant to Canada, getting approved for a credit card can be tough. Credit issuers often require a Canadian credit history, which can be difficult to obtain. This is because Canadian banks will not recognize your credit score from another country. As a result, you'll need to build a credit score from scratch.

Fortunately, some companies give recent immigrants a chance. For example, many banks offer newcomer credit cards that don't require a credit history. Some unsecured credit cards for recent immigrants include:

BMO® Credit Card for Newcomers



CIBC Credit Card for Newcomers



HSBC Credit Card for Newcomers



TD Credit Card for Newcomers



Scotiabank StartRight Program



RBC Newcomer Advantage Program

The Bottom Line

Credit is essential in our society, so it's vital to improve your score. Bad credit can make it challenging to get approved for loans, rent an apartment, or even land a job. One of the best ways to do this is by using a credit card responsibly.

Use your credit card regularly, and pay off your balance in full each month. This will show creditors that you are using credit responsibly and improve your credit score over time. You can also consider getting a secured credit card, which is a great way to rebuild your credit if you have bad credit.

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