There are quite a few good credit cards out there if you're looking to rebuild your credit, but some stand out above the rest for their low annual fees and monthly reports to credit bureaus. I constantly keep up with the credit cards and policy changes and make my recommendations below based on years of experience.
I recommend the Scotiabank Value Visa Card as the #1 credit card in Canada to rebuild your credit if you have bad credit history. It has a very low annual fee, offers a 0% introductory interest rate for the first 6 months, and comes with basic insurance as well as Avis and Budget car rental complimentary membership.
What Is A Credit Card For Rebuilding Your Credit?
Credit cards that help you rebuild your credit are a type of secured credit card that doesn’t have credit score requirements to apply. Secured credit cards report periodically (usually monthly) to the major credit card bureaus in Canada, Equifax, and TransUnion, which means that if you keep making your credit card payments on time, you will slowly start rebuilding your credit, eventually giving you access to the best credit cards on the market.
Secured credit cards work by using a security deposit as a means to ensure they will get their principal back. If you have low credit, you are less likely to pay back debts, and credit card issuers want to minimize that risk. Compared to regular credit cards, secured credit cards are very limited in terms of perks and usually don’t offer benefits like cash back or insurance. Anything over $50 is considered a high annual fee for a secured card. Similar to a debit card, you are limited by your security deposit and can’t spend more than the amount you deposited – that also means no overdraft.
Without further ado, here are the best credit cards to rebuild credit Canada has to offer:
- Scotiabank Value Visa Card: Best for 0% introductory interest rate for the first 6 months
- Refresh Financial Secured Visa Card: Best for guaranteed approval
- Capital One Guaranteed Approval Secured Mastercard: Best for low minimum deposit
- Home Trust Secured Visa: Best for flexibility, choose between no-annual fee or low-interest options
- KOHO Mastercard Prepaid Card: Best for no foreign exchange fee
- Plastk Secured Credit Card: Best for generous welcome bonus and grace period
- President's Choice Financial Mastercard: Best for access to Mastercard Global Services
- Canadian Tire Triangle Mastercard: Best for cash back earn rate at CT stores
- Neo Financial Mastercard: Best for virtual card and no cash back limit per year
How Do Credit Cards Help You Rebuild Your Credit?
Traditionally, credit card companies take a risk of default when issuing a card to someone with low credit. Secured credit cards and credit cards dedicated to rebuilding credit eliminate this risk by requiring cardholders to make a security deposit, which acts as both collateral and credit limit; you can only use as much as you deposited. In that way, secured credit cards are similar to debit cards, but unlike debit cards, secured cards will help you rebuild your credit.
Most secured cards don’t have a minimum income or credit score requirement. This help anyone, from students who don't yet have a credit history, to people who have a bad history, work their way up to a good credit score so they can then apply for good rewards cards like the American Express Gold or Marriott Bonvoy, or for premium cards like the Amex Platinum.
Pros & Cons Of A Credit Card Dedicated To Rebuilding Credit
Pros: Why A Secured Credit Card May Be Worth It
- Reports monthly to credit card bureaus
- Great for rebuilding your credit score
- No risk of overspending – you can only spend as much as you deposit
- Low-to-no credit score requirements
Cons: Why A Secured Credit Card May Not Be Worth It
- High minimum deposits
- Very limited perks and benefits
- Your security deposit is locked in the account until you close it
How To Choose A Credit Card To Rebuild Credit In Canada
Choosing a secured credit card is easy – as long as you know what to look for. Consider all these factors before you choose one:
Credit bureau reporting
The main reason for getting a secured credit card is to rebuild your credit score. First, you should check if the secured credit card reports to the credit card bureau in Canada. The two biggest bureaus in Canada are Equifax and TransUnion – look for a secured card that reports to both, preferably monthly.
Most secured credit cards are very limited when it comes to rewards, so if you apply for one with an annual fee, it’s very unlikely you will make enough from the rewards to make it back. Make sure to choose a secured credit card that has a low annual fee or no annual fees at all. Anything above $50/year is considered a high annual fee for a secured credit card.
This isn't the case with normal rewards credit cards which offset the annual fee with a series of perks, benefits and rewards on your purchases, like the Cobalt Card which can get you up to 10%+ back on food and drink plus a $100 travel credit among other benefits that'll make the $12.99 monthly fee be a no-brainer.
Credit cards dedicated to rebuilding credit usually have a mandatory security deposit. It works like a line of credit, and you won’t be able to use your card until you make the deposit. Minimum deposits usually start at $300 but can go as high as $500, depending on the issuers. Look for a card that has a low minimum deposit and a relatively high maximum deposit for the best flexibility.
Option to upgrade to an unsecured card
Most secured credit card issuers offer the option to upgrade your secured card into an unsecured credit card after you build up your credit to an acceptable level. When choosing a secured credit card issuer, plan ahead and keep this in mind.
One of the first things you should look at is the network the secured card uses. In Canada, Visa and Mastercard are accepted almost everywhere, but you need to make sure it is accepted at your favorite stores. For example, stores like Costco and Walmart Canada don’t accept Visa.
How To Apply For A Credit Card To Rebuild Credit In Canada
Minimum Security Deposit
After you apply for a secured card, you will need to make a deposit before you start using it. This amount is usually between $200 and $500, and it determines how much you can spend using the card. Assuming your account is in good standing, you will receive your deposit back in full after you close your account.
Secured that helps you rebuild your credit does not require a good credit score or, in most cases, a credit score at all. By design, credit card companies don’t take on any risk by issuing secured or prepaid cards, and cards are approved instantly without credit history checks.
In Canada, the minimum age to request a credit card is the age of the majority. Teens under that age can’t get approved for credit cards but can be added as authorized users to one of their parent’s credit cards. For reference, the age of the majority in Alberta, Manitoba, Ontario, Quebec, Prince Edward Island, and Saskatchewan is 18 years old. In all other provinces, the age of the majority is 19.
Canadian credit cards are available to residents and non-permanent residents. However, most premium credit cards require you to be a Canadian resident. You don't even need a credit history for other card types like prepaid and secured credit cards. At the end of the day, residency requirements will depend on the specific credit card issuer and the type of card.
Income And Bank Account Requirements
Secured cards don’t have any income requirement. Some secured and prepaid cards don’t even require you to have a bank account, making them an ideal option for the unbanked and people who have low credit scores.
Credit Cards To Rebuild Credit In Canada FAQs
Are Credit Cards That Rebuild Credit Worth It?
Credit cards that rebuild credit might be worth it for you:
- If you have a low credit score and are looking to rebuild it
- If you want to limit your spending and are looking for a card that can help you manage your budget
- If you don’t have a bank due to residency issues or otherwise but would like to receive payments directly to one of the major networks like Visa and Mastercard
- If you have no credit history and find it difficult to apply for a premium credit card
Credit cards that rebuild credit might not be worth it for you:
- If you are looking for a credit card with lots of perks and benefits
- If you want to earn interest on your deposit
- If you have a high credit score and can apply for cards with better rewards
What Is The Best Free Credit Card For Rebuilding Credit In Canada?
The best free credit card for rebuilding credit in Canada is the Home Trust Secured Visa. It reports monthly to Equifax and TransUnion, doesn't have any credit score or credit history requirement, and is completely covered against fraud through Visa’s Zero Liability Policy.
How Do I Remove A Collection From My Credit Report In Canada?
There are two ways to remove collections from your credit reports:
- If you believe the information on your report is inaccurate, you can file a complaint to dispute it
- If the information is accurate, you have to wait 7 years from the date of the collection for the collection to be removed.
Does Having Multiple Credit Cards Affect Your Credit Score In Canada?
Yes, having multiple credit cards affects your credit score. In the long term, having multiple cards can be beneficial by decreasing your credit card utilization percentage. In the very short term, it may hurt your credit due to the credit history checks (if applicable).
Can I Get A Credit Card With Poor Credit In Canada?
Yes, you can get a credit card even with poor credit in Canada. There are cards dedicated to people with low credit, including secured and prepaid cards. Secured cards will help you rebuild your credit, while prepaid cards can make paying easier but will not help you with your credit.
What Credit Score Do You Need For A Credit Card In Canada?
It depends. Most credit card bureaus in Canada agree that an acceptable credit score for approval starts at 650, but credit cards like secured and prepaid don’t have such requirements.
What Builds Credit Beside Credit Cards In Canada?
Applying for personal loans, secured credit cards, Rent Reporting Services, and a Co-Signer are some of the most common ways to build your credit. Keep in mind that to apply for a personal loan, you will need an acceptable credit score, so it’s usually a good idea to start with a secured card that doesn’t have a credit score requirement.