Those that have bad credit scores know how difficult life can get. A bad credit history can make it hard for you to get a loan for a car, a lease for an apartment, or a mortgage for your house, among other important things. Even so, bad credit is not the end of the world. You can, in fact, rebuild it, but only by using the right approach. Thanks to quite a few Canadian credit card companies, you can both build up a limited history and greatly improve bad scores. Keep reading to find out more.
How Do You Fix a Bad Credit Score?
There is, more or less, no better option to rebuild a bad or low credit score other than using your credit card the right way. Remember, payment history makes up 35% of your total credit score, according to GreedyRates. (1) Furthermore, credit utilization plays a large role and takes up another 30% of your score. This means that if you take on less credit, you will also get a much better score. Credit cards that have a higher limit on them also lower credit utilization.
Secured Credit Cards vs. Guaranteed Credit Cards
Signing up for your typical credit card is quite difficult, or even impossible, if you have a low enough credit score. However, you can always get a guaranteed or secured credit card, if all else fails.
To start using a secured credit card, a customer will have to place a security deposit (2) that usually amounts to the total credit limit on one such card. (2) How much money you need to put down before being able to use a secured credit card can vary between $200 and $1000, but can also be much higher. Then, once you pay off your balance or debt, you will get your deposit returned to you in full.
If nothing else is available to you, there is a good chance that you will qualify for a guaranteed credit card. (3) Better yet, a significant number of companies will only provide you with a questionnaire to see whether you’re eligible, instead of bringing your credit score further down with a hard inquiry.
Best Credit Cards in Canada for Bad Credit
1. BMO Secured Credit Card
BMO offers a MasterCard that you can reload. The security deposit on these cards can vary from $100 to $10,000, which is the same amount of credit that you will have at your disposal. (4) To apply for this card, you will only need to spend a few minutes online. What’s more, fees for an entire year of service are only $6.95, while purchases have no interest rate applied.
2. Home Trust Secured Credit Card
With a Home Trust secured credit card, the security deposit is in the range of $500 to $10,000 and it equals your maximum credit limit. (5) However, additional deposits can increase this limit further. There are no annual fees related to this card if you choose the 19.99% APR, or you can pay $59 per year with a lower APR of 14.9%.
3. Refresh Financial Guaranteed Credit Card
Refresh Financial offers a guaranteed credit card, but everyone who wants to apply needs to meet a few basic requirements. Namely, you have to have a Canadian ID, an open bank account, and a minimum monthly income. (6) With that said, Refresh Financial does not do a credit check before you are approved. As with other companies, the size of the credit limit depends on the size of the security deposit that you put down, but the range starts at $200 and goes up to $10,000. Lastly, The APR comes out to 17.99% and carries with it a fee of $12.95 paid annually.
4. Capital One Guaranteed Credit Card
Getting a guaranteed credit card from Capital One requires a few more steps than what you might expect. (7) For starters, you need to be of legal age for your province or territory, and not be an owner of another Capital One credit card. Besides that, you should not have had a badly standing account in the year prior to applying, or have tried signing-up for a Capital One card more than one time in the last month.
Capital One has both unsecured and secured credit cards to offer potential customers, depending on their credit history. Moreover, credit limits can be anywhere from $300 to $7,000 and come with an annual fee of $59 and a 19.8% APR.