Best 2018 Credit Cards in Canada for Bad Credit
Best Credit Cards for Fixing Bad Credit
Getting a credit card when you have bad credit can be tough. Lenders look at your credit score to determine how likely or unlikely you are to repay a loan, because, ultimately, your credit score is based on your record and how you’ve handled credit in the past.
Fortunately, whether you have a good or bad credit history, RateSupermarket.ca offers credit card options for everyone’s needs.
What is a secured credit card?
With a secured credit card, you pay a security deposit to the credit card issuer in return for use of the card. If your credit is not that bad, you may qualify for a card that requires only a partial deposit. But if your credit is as bad as it gets, you may only qualify for a card that requires a full deposit, such as a $100 security deposit for $100 of credit. And while a security deposit can’t be used to make a payment, your security deposit will be refunded if you close your account.
In addition to the security deposit, secured credit cards usually charge an annual fee, as well as interest on unpaid balances.
Secured credit cards are made to look like any other credit card, so no one will know the card is secured. That information is kept between you and the card issuer. Other benefits of these cards include:
- Zero liability: You won’t be held responsible if your card is stolen and used by someone else.
- Fraud alerts: You will be alerted of any suspicious or unusual purchases to make sure your card has not been stolen.
- Payment reminders: You will be reminded before your payment is due so as to avoid late payments. This will help keep you on the path to good credit.
Some cards will even offer you the ability to upgrade to an unsecured credit card after a certain period of time. That’s why it’s best to compare all available secured credit cards to ensure it carries the best features for your needs.
What is an unsecured credit card?
All credit cards, except secured credit cards, are issued without a security deposit. With unsecured credit cards, the issuer is giving you access to credit based on the belief that you will repay the credit you use. Issuers use your credit score to determine your credit-worthiness and the amount of credit you’ll receive. If you have good credit, you’ll likely be given a higher credit limit because you’re deemed as trustworthy of repaying your debts. But if you have a poor crfedit score, your credit limit will likely be low.
What are the best credit cards for those with bad credit?
The best cards – and only – cards available for people with really bad credit are secured credit cards. For example, the Capital One® Guaranteed Secured Mastercard® is a great secured option as it has an annual fee of $59, sends you payment alerts, and will protect you against fraud and unauthorized use of your card.
What are the easiest credit cards to get when you have bad credit?
The Home Trust Secured Visa Card, Refresh™ Secured Visa and No Fee Home Trust Secured Visa all offer approval of virtually everyone – as long as you are the age of majority. The minimum security deposit required for these cards ranges from $200 to $500, with a maximum of $10,000.
The Home Trust Secured Visa assures approval with relatively low interest rates on unpaid balances, but it does come with an annual fee of $54.90 which can be paid monthly ($5 a month). The No Fee Home Trust Secured Visa offers the same easy approval, but it has a higher interest rate on unpaid balances because it has no annual fee.
How long will it take to improve my credit score with a secured credit card?
It depends on the severity of your credit score. If your credit is not that bad, it could take as little as one to six months of making your secured credit card payments on time to improve your score. If your credit is really bad because you made a consumer proposal, it could take three years. And, if you declared bankruptcy, it can take seven years to before you see your credit score improve. That being said, you have to start somewhere, and a secured credit card will help you begin rebuilding your credit.
Will debit or prepaid cards help me improve my credit score?
No. Debit and prepaid card payment history is not reported to the credit rating agencies, so they will not help rebuild your credit history.
What exactly is a credit score?
A credit score is a three-digit number that gives lenders of credit and other concerned parties an idea of your credit worthiness. The number is based on a U.S. credit scoring system called FICO, which stands for Fair Isaac Corporation, the company that created and introduced the formula more than 50 years ago.
As a rule, credit scores range from 300-850. However, a few lenders will use a wider ranging score from 250-900. The higher your score, the better your credit. If your score is between 740-799, you should be approved for credit without issue. It becomes more difficult to obtain credit with a lower score. Here are the categories of creditworthiness based on the FICO score system:
- 300 to 579 Very Poor
- 580 to 669 Fair
- 670 to 739 Good
- 740 to 799 Very Good
- 800 to 850 Excellent
Who decides on my credit score?
According to the Financial Consumer Agency of Canada website, every payment, partial payment, or non-payment you’ve made to a lender is reported by the lender to one or both of the two major credit rating agencies in Canada; Equifax Canada and TransUnion.
These are private companies that follow your credit history and use a formula to assign you your individual credit score. Equifax and TransUnion receive this information from credit card issuers and other lenders of mortgages, personal lines of credit and car loans.
Both companies also offer credit reports that detail your credit history, which may provide insight on areas where you can improve, like payment frequency or how often you apply for a new credit card.
How do I improve my bad credit score?
The best way is to show lenders you can be trusted is by repaying your debts. If you don’t qualify for an unsecured credit card, the best way to rebuild your credit is to get a secured credit card.
If I have bad credit, what else can I do to get good credit?
After you are approved for a secured credit card and continue rebuilding your credit history, you need to be mindful of the other items that credit agencies factor when determining your credit score. The precise weighting of these factors differs among credit agencies, but you can’t go wrong with the following tips:
- Pay your bills, even in a dispute. Even if you are in a dispute with a merchant, pay the balance due. You may be expecting a refund, but accept that it will be applied as a credit later. It may seem like a no-brainer, but you should always pay off your unpaid balances when they are due!
- Don’t use all your credit. Avoid using more than 30 per cent of the credit that is available to you. The more credit you use, the worse you will appear in the eyes of lenders.
- Use different types of credit. Using a mix of credit types is looks good on your record. So, rather than just using a credit card, try adding a loan or a line of credit. But only make this move once you are certain you can make your payments without issue and on time.
- Limit checks on your credit history. When you have too many hard credit checks into your history, your credit score is lowered because you appear to need too much additional credit. Lenders assume you are living beyond your means and may be wary that you won’t be able to make all your payments.
- Keep your old credit cards even if you get a new one. The longer an account is open and is in use, the better your credit score. So even when you no longer need your secured credit card, it’s a good idea to keep it and use it occasionally (some cards may still charge you an admin fee for keeping the account open with no charges).
- Monitor your credit report. Make sure your credit report does not contain errors and there has been no fraud committed in your name by getting your free credit report each year from Equifax Canada and Trans Union.
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