Shop Canada's Best Credit Cards for Poor Credit
Credit Cards for Building Credit
Credit cards are necessary if you want to do a number of things in today’s world, such as booking a hotel room, shopping online, and buying large-ticket items. But if you have a bad credit score, it may seem impossible that any lender will ever approve your application, which leaves many borrowers wondering “what can I do?” Fortunately, there are credit cards out there that are ideal for people with bad credit, and card issuers who are willing to give cards to people with credit scores in the lower range. Here, you'll learn about what it means to have bad credit, what card options are available to you, and the best way to find credit cards that suit your needs.
How to Get a Credit Card When You Have a Bad Credit Score
Applying for a credit card can be nerve-racking, especially if you know you don't have great credit and aren't sure if you'll qualify. But it's still possible to get a credit card when you have bad credit, and the trick is knowing where to look. But before getting into that, let's discuss what constitutes a bad credit score.
Credit scores range from 300 to 900, where 300 is the worst score possible, and 900 is the best. Bad credit falls into two categories: 300 to 500 is considered very poor, and 501 to 579 is considered poor. These scores are based on a number of factors, including:
- Your payment history (such as do you pay bills on time)
- The length of your credit history
- How much credit you have available in comparison to how much you've used
- Credit checks (each credit inquiry will impact your score negatively)
- Any bankruptcies or collection items on your credit file
- Age of your accounts
It is possible to qualify for a credit card with bad credit, and most of the larger financial institutions have options for people who are considered a high credit risk. As a high-risk borrower, you can take your chances and apply for the cards designed for people with bad credit, or you can take steps to improve your score and apply at a later date. Here are some credit repair tips to help you get started:
- Pay all your bills on time
- Limit inquiries into your credit history
- Check your credit history for errors and request they be resolved
- Pay off as many debts as possible
- Keep a low balance on your credit card (use less than 30 percent of the credit available)
Exploring Your Options: The Best Credit Cards for Bad Credit
Having a credit card and managing it responsibly is a great way to improve your credit score, and it can also make life easier in emergency situations. If you do have a bad score and want to apply for credit, there are options available. For instance, many financial institutions have low-interest (and often low-limit) cards that you can qualify for with bad credit, and these include:
- RBC Visa Classic Low Rate
- No-Fee Scotiabank Value Visa
- MBNA True Line Mastercard
- BMO Preferred Rate MasterCard
- RBC Visa Classic Low Rate
- TD Emerald Visa Card
Secured cards are also an option, and these include the Refresh Financial Secured Visa, the Home Trust Secured No Fee Visa, the Peoples Trust Secured MasterCard, and the Capital One Guaranteed Secured MasterCard. With a secured credit card, you will pay a security deposit equal to the size of the credit limit, and if you ever default on a payment, the card issuer will use the deposit to pay the balance.
Prepaid credit cards are also something you can explore, but be aware that while this will provide you with a credit card to use, it won’t help to rebuild your credit as well as the other credit card types. Two options in this category include the CIBC Air Canada AC conversion Visa Prepaid Card and the BMO Prepaid Travel MasterCard.
A final option is the store credit card (such as the Hudson’s Bay card). Along with giving you a credit card you can use in-store and sometimes elsewhere, store cards also come with certain perks, such as promotions, introductory interest-free periods, discounts, and more.
Applying for Cards with Bad Credit: How Do I Know Which Credit Cards I Can Apply for?
Before you apply for a credit card, the first step is to check your credit score. Go online to Equifax Canada and TransUnion Canada and request a copy of your credit report from each organization (they’ll mail you copies). When you know for sure that you have bad credit, you can narrow down your card choices to the types discussed here today.
Avoid applying for cards that are designed for people with good credit, because the application probably won’t be approved, and it will result in a potential lender checking your credit, which will further reduce your score. Here are some indications that a credit card is aimed at somebody with better credit:
- It offers cashback or points rewards
- There's a promotional interest rate
- It has a low APR
A great way to apply for credit cards that you know you're eligible for is to use shoptherate.ca, where you can filter cards based on a variety of criteria, and this will let you see which cards are best for people looking for low-interest, prepaid, and other credit cards that are better suited for borrowers with poor credit.
Credit history is extremely important for anybody looking to borrow money, whether that’s in the form of a loan, a mortgage, or a credit card. However, it is still possible to get a credit card when you have bad credit, and the trick is knowing what cards to apply for. Getting a credit card, paying the bill on time, and keeping your balance low will all help to improve your credit score. In the meantime, there are also other measures you can take to improve your credit score, which will mean you'll be eligible for better terms, better cards, and higher credit limits down the road.