Best Credit Cards for Building Your Credit in Canada

Building credit in Canada can feel like trying to solve a puzzle with missing pieces. You need credit to get credit, but how do you start when you have none?

The good news is that several Canadian financial institutions have created innovative solutions specifically designed to help you establish and strengthen your credit profile.

1. KOHO

KOHO Credit Building is a feature that helps you build or rebuild your credit history, you can subscribe with our KOHO Essential Account:

• It has a low monthly plan fee that can be waived when you set up direct deposit or add +$1,000.

• Use a prepaid Mastercard® for groceries, bills, subscriptions, and travel.

• Grow your savings with a 2% interest savings rate on your entire balance.

• Earn 1% cash back on groceries, eating & drinking, and transportation.

• You can subscribe to Credit Building for $10/month, it's an affordable way to build your credit history.

• Enjoy unlimited transactions and free e-transfers (never worry about fees when sending money to someone again).

2. Secured Neo Mastercard

This card offers the benefits of both a secured and unsecured credit card.

Monthly Fee: $5

Interest Rate:

• Purchase rate: 19.99% – 29.99% (QC: 19.99% – 24.99%)

• Cash advance rate: 22.99% – 31.99% (QC: 22.99% – 25.99%)

Minimum Security Deposit: $50

Card Limit: $50 – $10,000

Card Requirement:

• Must be the age of majority in your province or territory of residence

• Must be a Canadian resident

• Must provide security funds

3. Home Trust Secured Visa

This card can help people take control of their future by helping them build their credit.

Monthly Fee: $0 or $59

Interest Rate:

• Purchase rate: 19.99% with no annual fees, or 14.90% with $59 annual fee

• Cash advance rate: Low-rate option: 19.80%; no annual fee option: 19.99%

Minimum Security Deposit: $500

Card Limit: $500 – $10,000

Card Requirement:

• Must be the age of majority in your province or territory of residence

• Must be a Canadian resident (excluding Quebec)

• Must have a source of income

• Cannot currently be in bankruptcy

Strategic tips for maximizing your credit building journey

1. Choose the Right Starting Point: If you're completely new to credit, KOHO might be your best bet.

2. Keep Utilization Low: Aim to use less than 30% of your available credit limit. This single factor can significantly impact your credit score improvement timeline.

3. Set Up Automated Payments: Payment history is the most crucial factor in your credit score. Automation eliminates the risk of human error.

4. Monitor Your Progress: Take advantage of free credit score monitoring offered by many of these providers to track your improvement.

When to expect results

Most positive credit building activities take 3-6 months to significantly impact your score.

Avoiding common credit building pitfalls

Resist the urge to apply for multiple cards simultaneously. Each application creates a hard inquiry, potentially lowering your score.

The minimum payment trap

While making minimum payments keeps you in good standing, paying your full balance monthly demonstrates superior financial management and avoids interest charges.

The closing old accounts mistake

Keep old credit accounts open even after you qualify for better cards. The length of your credit history positively impacts your score.

Your next steps to credit success

Building credit in Canada doesn't have to be a mysterious process.

Remember, your credit building journey is a marathon, not a sprint.

Choose the card that best fits your current situation, use it responsibly, and watch as doors begin to open in your financial life. The investment in building strong credit today will pay dividends for decades to come.