Bad credit need not end your ability to borrow or successfully apply for a new credit card. The unexpected loss of a job or some other sudden financial burden can make it difficult or impossible to pay your bills on time for a certain amount of time. When this happens, your credit score will begin to drop, which can make it hard for you to get more credit [1].

Credit Score

A credit score is a three-digit number that ranges between 300 to 900. Any score above 660 is considered good. Any score below 660 is poor. Banks and other lenders consider anyone with such a score as high risk.

Lack of credit history can also make it hard for a person to access credit. Newcomers to Canada often have this problem.

Whether you have bad credit or no credit, you can obtain a secured or unsecured credit card to help you establish your credit or improve a bad credit rating [2].

Difference Between Secured and Unsecured Credit Cards

A secured credit card requires you to pay a certain amount of money into the card. This will essentially be your credit limit. Secured credit cards are easier to get because the lender has sufficient collateral [3].

An unsecured credit card works like a normal card. No cash collateral is required. Getting an unsecured credit card with a poor credit rating can be a challenge, but there are cards available for borrowers in your situation [4].

The Top Unsecured Credit Cards in Canada

The top unsecured credit cards for Canadians in 2022 include the following:

Tangerine Money-Back Mastercard

Scotiabank Value Visa Card

BMO Preferred Rate Mastercard

RBC Visa Classic Low Rate Card

KOHO Prepaid Visa Card

Capital One Low Rate Guaranteed Mastercard

The Tangerine Money-Back Mastercard is one of the best no-fee cash back credit cards in the country. There is no annual fee, and it pays up to 2% cash back on your spending. New cardholders get a 1.95% promotional balance transfer for the first 6 months. There is a standard 19.95% interest rate on purchases, balance transfers, and cash advances, and comes with free purchase protection and extended warranty coverage. To qualify for this card, you need a minimum income of $12,000 and a credit rating not below 600. You must have had no bankruptcies within the past 7 years.

The Scotiabank Value Visa Card has a low annual fee. You can transfer your existing credit balance to this card if you are looking to pay a lower interest rate. There is a $20 annual fee. One of the best benefits of this card is a 25% discount on car rentals from AVIS and Budget. There is a $500 minimum credit limit on the card. You can successfully apply for the card if you are new to Canada and have no credit history. Otherwise, you must have fair to good credit to qualify.

At 12.99%, the BMO Preferred Rate Mastercard offers one of the lowest interest rates in Canada. There is also a 3.99% introductory rate on balance transfers within the first 9 months. To qualify for the card, you must have a minimum income of $15,000 and a fair to good credit score rating. Other perks of the card include free extended warranty and purchase protection. There is a $20 annual fee.

The RBC Visa Classic Low Rate Card comes with a low 11.99% interest rate on cash advances and purchases. To qualify for the card, you must have an income of $15,000 and a fair to good credit score rating. There is a $20 annual fee. The perks of the card include purchase security and extended warranty insurance. You will also save 3 cents per litre when you buy gas at Petro Canada.

The KOHO Prepaid Visa Card has no annual fees, and it comes with a versatile app that helps you with budgeting, automatic savings, and the real-time tracking of your spending. You are required to put money in the card before you use it. The amount you put in is your credit limit. There is no minimum income or credit score requirement.

The Capital One Low Rate Guaranteed Mastercard is the perfect unsecured credit card for people with a bad credit score rating. It offers a 14.90% interest rate on purchases and balance transfers. The interest rate for cash advances is 19.8%. There is an annual fee of $79. Your credit limit will be between $300 to $7,000. To qualify for this credit card, you must meet the following criteria be at least the age of the majority in your province or territory of residence, not have applied for a Capital One account more than once in the last month, not have an existing Capital One account or a pending application for one, and not have a Capital One account that was in bad standing in the last year. If you are not approved for the unsecured version of this credit card, the lender may approve you for a secured card.

In Conclusion

If you have bad credit, applying for a secured or unsecured credit card is a great way to repair it [5]. There are plenty of lenders in Canada willing to offer you this option. If you are currently in work and making decent wages, you should consider applying for one of the credit cards described above.

sources:

[1] https://www.investopedia.com/the-side-effects-of-bad-credit-4769783#:~:text=A%20poor%20credit%20history%20can,you%20in%20a%20job%20hunt.

[2] https://www.savvynewcanadians.com/best-credit-cards-bad-credit-canada/

[3] https://www.experian.com/blogs/ask-experian/is-secured-card-or-unsecured-card-better-for-credit/#:~:text=The%20main%20difference%20between%20secured,when%20you%20open%20your%20account.&text=But%20aside%20from%20the%20security,secured%20and%20unsecured%20cards%20work.

[4] https://comparisonsmaster.com/articles/the-best-unsecured-credit-cards-in-canada-2022?dc=mfb&subid4=iv-ca-a-cmp-unsecuen-80645-12-any&fbclid=IwAR18iSInLm_YsVK5msUFvxB6YXzlTcz08mLVx0X3qJ5w8ZA9ALd1HblpgNE

[5] https://wallethub.com/edu/cc/how-to-build-credit-with-a-credit-card/50876