Rebuild Your Credit Score With Credit Cards in Canada

Common sense may lead you to believe that if you have bad credit, the worst thing you can do is sign up for another credit card. But, this couldn’t be farther from the truth. Actually, the best and only way to improve your credit score is to have a credit card. When used correctly, credit cards can help you rebuild your credit and there are many credit cards that are aimed at helping people with poor credit scores. 

Even though many of these credit cards come with high-interest rates and lower spending limits, they’re a good first step to rebuilding your credit score, which in the future, will help you get approved for loans, lines of credits, and mortgages.

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Credit Scores

Chances are you’re probably already aware that each Canadian has a credit score between 300 to 900. Higher numbers correlate to better credit scores and they make it easier to apply for credit cards or loans. Credit scores around 650 are considered normal and if your score is 650 or above, you shouldn’t have any issues getting approved for a credit card. However, when your score falls below 650, you may start getting denied by companies. 

Types of Credit Cards

If you pay on time, credit cards can help reestablish your credit. There are two types of credit cards you can choose between – secured and unsecured. Secured cards are actually marketed to those with bad credit and they are like normal credit cards, but you need to provide a deposit that matches the size of the credit limit. This deposit is used by the credit card company in case you default on a monthly payment. Because there is no risk for the credit card company, getting approved for secured cards is easier than getting approved for unsecured cards. If you decide to close your account, the deposit will be refunded. The spending limit usually starts at $200 and goes to around $5,000. The annual fees are also low, ranging from $10 – $30.  Unsecured cards are what most people use and you don’t have to put down a security deposit. They are usually available to those with normal credit scores (around 650). These cards also often have rewards like travel points and cashback.

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Best Secured Credit Cards

  1. Capital One Guaranteed Secured MasterCard: As the name suggests, this card guarantees approval and there’s a limit of $300 to $7,000. The Captial One Guaranteed Secured MasterCard can be used to make bookings, car rentals, online purchases, in-store purchases, etc. There’s also emergency cash advances and card replacement with zero liability. The interest rate is 19.8% and the annual fee is $59. 
  2. Refresh Financial Secured Visa: Your guaranteed approval without a credit check and you’ll get Financial Intelligence Training which is a free online educational program that helps those with bad credit improve their finances. Also, when you refer a friend, you’ll earn $100, which may seem like pocket change, but it adds up over time. The interest rate is 17.99% and the annual fee is $48.95. There’s also a 21-day interest-free grace period on all new purchases. One thing to look out for is that if you don’t use the card each month, there is a $2 fee for each month the card isn’t used and if you go over the credit limit your card will be canceled. 

Best Unsecured Credit Cards

  1. RBC Visa Classic Low Rate Card: The selling point of this card is the low-interest rates on purchases and cash advances. The interest rate is 11.99% and the annual fee is low as well, at only $20. There’s no guaranteed acceptance for applicants with low credit scores, but there’s also no set minimum credit score for approval. The RBC Visa Classic Low Rate Card also has purchase protection, a discount of 3 cents per liter of fuel, and 20% extra Petro-Points when you buy gas at Petro-Canada.  
  2. Capital One Low Rate Guaranteed Mastercard: Although this card is unsecured, it still offers guaranteed approval with low-interest rates. At a $79 annual fee with a 14.9% interest rate on purchases and balance transfers and 19.8% cash advances, this card also offers Price Protection. Price Protection allows the cardholder to be reimbursed for purchases from the retailer when there’s a price difference up to $100 per item and $500 per calendar year when an item goes down in price within 60 days of purchase. Other benefits include travel accident insurance, coverage for baggage, and rental vehicles. Like the secured Capital One Card, this one also has a credit card limit of $300 – $7,000.

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