Best Bad Credit Credit Cards in Canada for 2024

Best credit card for bad credit 

Before applying for a credit card, it may be helpful to learn a bit more about credit so you can use your new credit card responsibly. There are a lot of reasons you may have a bad credit score. Maybe you defaulted on a loan or always pay your bills late.

Whatever the case, you can recover and rebuild your credit score with a credit card. While it may seem backward, a credit card can be a powerful tool when used carefully to rebuild credit. It also can be a saving grace in case of an emergency if you have an available balance. The following is a quick overview of how a bad credit score can be rebuilt in Canada.

How Do You Get Bad Credit?

A credit score can range from 300 to 900 in Canada. If you have a 574 or less you are considered to have bad credit. There are multiple ways that you can get a bad credit score, but the common reasons are usually defaulting on a loan, having a high debt to income ratio, opening extensive amounts of credit, applying for credit in multiple places at once, or having a poor payment history full of missed or late payments. Each of these actions impacts your credit score differently.

Missing one payment is much different than a payment history that is dotted with missed payments. Opening two loans (such as a mortgage and car loan) is not as bad as holding four maxed-out credit cards or multiple student loans that are defaulted.

Other people have a bad credit score simply because they don't have a credit history. If you are new to Canada or newly 21, your credit score may be low because you have not had a chance to contribute negatively or positively to your credit score making you a higher risk to lenders.

What Is the Impact of Bad Credit?

Bad credit generally will negatively affect your financial situation as everyday tasks will become much harder for you. Not only will you face higher interest rates for simple things such as a car loan or a mortgage, but you may have trouble getting approved for either loan without a guarantor. Many people find that bad credit makes it difficult to rent an apartment or obtain reasonably priced insurance premiums. In some cases, a bad credit score may even impact your ability to be hired within your chosen career.

How to Rebuild Your Credit with a Secured (or Unsecured) Credit Card

A low credit score does not mean that you should give up. Instead, you should look at it as the impetus to change your financial behavior. You can change your credit score by making smart financial decisions and using a secured (or unsecured) credit card to build your credit score.

To do this, first of all, you need to use the credit card. A lot of people think opening a card will be enough to improve their credit score, but you won't build a payment history if you aren't making payments that can be reported to the major credit agencies. Make it a point to spend a small amount on your credit card every month and pay your bill on-time monthly.

It is important however that you don't overspend even if you have an available balance. A big part of your credit score is how much credit you have available to you. A card that is maxed out signs someone is financially irresponsible or in trouble. Ideally, keep your credit card utilization at or below 30% to help your score move upwards.

Open an account on a free credit score website and keep an eye on your credit score so you can see if your credit card usage is helping you move upwards. If it is not, take a look at your monthly spending habits and see where you can adjust to help maximize the results.

How to Build Your Credit Score as a Newcomer to Canada

The best thing you can do to jumpstart your credit score when you move to Canada is open a credit card. You may need to apply for a secured card, but it will help you build a credit history. Length of credit history plays a role in your overall credit score so you want to do this as soon as possible. You can take other actions later to build your score, but you can't turn back time.

Next, you will want to apply for a mobile phone because carriers that offer postpaid plans report to credit bureaus which will help you build a positive payment history if you pay on time each month. On that note, make sure that you always pay your credit bill on time as well so that you are building a positive credit history. Also, keep your credit utilization below 30% at all times to keep your available credit ratio high.

How to Tell If You Need a Credit Card for Bad Credit

The answer to this question is simple. Do you have a bad credit score? Do you have a poor payment history or high amounts of debt and low available credit? Do you have a very limited credit history? If you can answer yes to these questions, then yes a credit card for bad credit could help you rebuild your credit score.

What to Look Out For in a Credit Card for Bad Credit

A credit card is a great way to rebuild your credit, however, you need to carefully research your options because not all credit companies that offer credit cards for bad credit are looking out for you. Most credit card providers know that if you have bad credit your options are limited, and are willing to take advantage of that fact. Many offer credit cards to consumers with bad credit in exchange for high APRs and very harsh penalties for missed or late payments.

When searching for a credit card for bad credit you need to start with fees and APR rate. While you need to expect a higher APR, try to find a credit card that offers a competitive rate compared to others in the same space. Also, look at the entire cost of the credit card which may or may not include program fees, annual fees, foreign transaction fees, and inactive account fees.

In addition, make sure you know whether or not your card requires a security deposit and if you can afford it. Obtaining a credit card only to max it out because you are short on cash will not help you build your credit.

What's the Easiest Credit Card to Get Approved for Bad Credit?

Even with bad credit, it is possible to get approved for a credit card, but you need to research cards based on your credit score. Every single person has a different credit history, so there is no one-size-fits-all answer in terms of which credit card is the easiest to obtain.

That said, it is usually easier to get approved for a secured credit card because they require a cash security deposit and are considered lower risk. Store credit cards also are usually easier to qualify for but they tend to have high APRs so use them carefully.

How Long Does It Take to Rebuild Credit?

There is no magic formula that can promise you a better credit score in "X" amount of time. If someone says there is, then they are lying. However, if you start responsibly using a credit card you can expect to see your credit score increase slightly every month and by the end of the year have an improved credit score so long as you don't add any more negative activity to your credit history.

Is a Secured Credit Card My Only Option If I Have Bad Credit?

No. Depending on how bad your credit score is you may also be able to obtain an "unsecured" credit card, you can also apply for a secured loan offered by a few lenders.

Open a New Credit Card To Boost Your Credit Today

If you are ready to obtain a secured credit card, utilize the information on My Rate Compass to help choose a card fitted to your circumstances. We list APRs, fees, and eligibility to help our customers find and choose a credit card that will help them change their credit situation. Take a minute to look over our recommendations and apply for the card that best fits your circumstances.

Applying for a credit card is the best way to boost your credit score in Canada. There are a handful of trustworthy credit card issuers that offer credit cards to applicants with bad credit. With just a little patience and smart credit usage, anyone can improve their credit score in Canada.