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Credit card options for applicants with bad credit

Looking to apply for a credit card but have a bad credit score? Here's what you need to know.

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While it is possible to get a credit card in Canada with bad credit, your options will be limited and you’ll have a difficult time finding cards with favourable interest rates or fees. While a bad credit score can have a negative impact on your chances of getting approved for a card – or being approved for a card with affordable rates and fees – working to improve your credit rating can help increase your chances of approval in the future.

What credit products can I get with bad credit?

If you can’t get approved for a credit card with reasonable rates, you might need to consider some of the following options:.

  • Debit cards. A good way to avoid debt is to steer clear from credit and only spend what you have. Debit cards are debt-proof and widely accepted as payment. However, keep in mind that using a debit card will have zero effect on your credit report and cannot help you rebuild your credit rating.
  • Prepaid credit cards. Prepaid cards are similar to debit cards in the sense that you’re spending only what you have. Unlike a debit or credit card though, you load funds on the card before using it. These cards also don’t affect your credit rating and don’t charge interest, so they can be a good way to build up your budgeting skills. Most prepaid cards are either Visa or Mastercard, so you should be able to use them in the same places you’d use your credit or debit card.
  • Short-term loans. Also known as a payday loan, this is a loan of up to $3,000 that is usually repaid within 14 days to one year, but usually terms are around one to three months. Keep in mind these loans come with excruciatingly high interest rates and fees, so really consider how much you need it before you apply.
  • Bad credit personal loans. If you’re in need of a larger amount than a short-term loan, there are some bad credit personal loans available that can offer amounts up to $5,000 or even $10,000. These loans usually come with a flat interest rate and, if you repay responsibly, can help you rebuild your creditworthiness.

Secured credit cards

Name Product Min. Required Deposit Purchase Interest Rate Cash Advance Rate Annual Fee Reward
Refresh Financial Secured Card
$200
17.99%
N/A
$12.95
The Refresh Secured Card has no credit check, a low annual fee and guaranteed approval once you secure your card with anywhere from $200 - $10,000.
Take advantage of a low annual fee, with no credit check and guaranteed approval once you secure your card with some funds.
Home Trust Secured Visa
$500
14.90% - 19.99%
19.80% - 19.99%
$0 - $59
Improve your credit score and make purchases with the Home Trust Secured Visa. Choose between paying no annual fee or low interest.
Choose from three card options: No Annual Fee ($0 annual fee, 19.99% purchase rate), Low Interest Rate ($59 annual fee, 14.90% purchase rate) or a Low Monthly Fee ($5 monthly fee, 14.90% purchase rate).
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How does a secured credit card help you rebuild credit?

A secured card does not automatically improve your credit score. To raise your credit score using a secured credit card, you’ll need to:

  • Pay off your balances every month. Secured credit cards report to credit bureaus just like unsecured cards, which means you’ll have a better chance at improving your credit score if you pay off your balance in full each month.
  • Stay within a budget. Credit cards are not free money. Since you’re looking to build your credit, you’ll want to pay off your balances in full each month – so you should only spend what you can actually afford.
  • Use your card regularly. Credit bureaus look for activity on a card every month, so if you charge a small amount and pay it off each month, you’re likely to improve your credit score over time.
  • If you can’t avoid carrying a balance, keep it small. Sometimes you need to put more on your card than you can afford to pay off at once. Credit bureaus look at your debt-to-income ratio, and it’s recommended that you keep this ratio below 30%. This means if you have a card with a $500 limit, try to keep your balance below $150.

Debit cards vs. secured credit cards

Debit cards and secured credit cards both require you to deposit cash in a bank account in order to spend money. However, secured cards do two things that debit cards don’t:

  • Debit cards don’t report to credit bureaus, and therefore don’t help build your credit.
  • Debit cards only let you use money from your bank account. Secured cards allow you to “graduate” to either partially unsecured credit cards — cards that allow you to spend a bit more than you’ve deposited — or fully unsecured credit cards that don’t require a deposit at all.

Credit scores explained

Your credit score is a numerical representation of the information on your credit report and helps determine your borrowing power when it comes to applying for credit. There are two credit bureaus in Canada: Equifax and TransUnion. Your credit score may vary slightly between the two bureaus since their algorithms differ slightly.

Credit score meter image

Generally, credit scores are broken down as follows:
  • Excellent credit score: 760-900
  • Very good credit score: 725-759
  • Good credit score: 660-724
  • Fair credit score: 560-659
  • Poor credit score: 300-559

Alternative options for borrowers with bad credit

Name Product Interest Rate Max. Loan Amount Loan Term Fees Min. Credit Score Link
Loans Canada Personal Loan
Secured from 2.00%, Unsecured from 8.00% to 46.96%
$50,000
3-60 months
No application or origination fees
300
Go to site
More Info
Loans Canada connects borrowers to lenders offering both secured and unsecured personal loans in amounts from $300 to $50,000. Submit one application to get rates from multiple lenders across Canada.
Fairstone Personal Loan (Unsecured)
26.99% - 39.99%
$20,000
6 months - 5 years
None
560
Go to site
More Info
Fairstone offers unsecured personal loans up to $20,000
Mogo Personal Loan
9.90% - 47.42%
$35,000
9 months - 5 years
NSF fee - $20 - $50
540
Go to site
More Info
Mogo offers loans up to $35,000 on flexible terms.
LoanConnect Personal Loan
Secured from 1.90%, Unsecured from 10.00%-46.96%
$50,000
3-60 months
No application or origination fees
300
Go to site
More Info
LoanConnect is an online broker that matches borrowers to lenders offering loans in amounts from $500 to $50,000. Get approved for multiple loan offers from different lenders in as little as 60 seconds with any credit score.
Cash Money Installment Loan
46.93%
$10,000
6 months - 5 years
Vary across provinces/territories
560
Go to site
More Info
Cash Money offers installment loans up to $10,000 for AB, MB and NB residents.
LendDirect Personal Loan
19.99% - 46.93%
$15,000
No end dates
None
560
Go to site
More Info
Borrow up to $15,000, based on your income and credit history, with a personal line of credit from LendDirect.
LendingMate Personal Loan
43% (British Columbia and Ontario) and 34.90% (Quebec)
$10,000
1-5 years
None
300
Go to site
More Info
LendingMate offers loans to Canadians with poor credit with no credit checks. Co-signer required for application.
Fairstone Personal Loan (Secured)
19.99% - 23.99%
$35,000
3-10 years
Varies by province
560
Go to site
More Info
Fairstone offers secured personal loans up to $35,000.
Magical Credit Personal Loan
19.99% - 46.80%
$20,000
6 months - 5 years
A single administration fee of $194 for $1,500 loans and up
300
Go to site
More Info
Magical Credit offers unsecured personal loans in amounts up to $20,000.
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Bottom line

Ultimately, a bad credit rating can have a big impact on your financial options, making it difficult to get a credit card, car loan, home loan or other forms of credit. Instead of looking for “bad credit” credit cards or options that involve no credit check, you can improve your chances of approval by rebuilding your credit rating and managing money responsibly.

Start by requesting a free copy of your credit report via one of the credit bureaus or online using a trustworthy credit reporting site. Once you receive a copy of your report, identify the negative listings on your file and begin to take steps to improve your credit score.

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