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Best Credit Cards for Building Your Credit

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Grace Guo

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Grace Guo

the best credit cards to build your credit with

Best Credit Cards for Building Your Credit

If you don’t have a credit history or have bad credit, getting a credit card can help you build or fix your credit, as long as you use it responsibly. However, most credit cards need some credit history to qualify, which can be tough for people with poor credit or no credit at all.

Luckily, if you fall into either of those categories, you still have options, like a secured credit card. A secured credit card can be one of the best credit-building credit card options out there. They work like regular credit cards but require a deposit, which typically sets your credit limit. Since the amount you deposit typically becomes your credit limit, if you want a higher limit, you need to deposit more. Your deposit is used as collateral if you don’t make payments.

Besides secured cards, there are other credit card options available for people with no credit or poor credit who either can’t or don’t want to make a significant deposit. We’ll cover all of these and more.

Best credit cards for no or poor/bad credit in Canada

The following are some of the current best credit-building credit cards in Canada for people with no or bad credit:

  • KOHO Essentials Prepaid Mastercard®

  • Neo Secured Credit

  • Home Trust Secured Visa Card

  • Capital One Guaranteed Mastercard®

KOHO Essentials Prepaid Mastercard®

The KOHO Essential Prepaid Mastercard® is one of the top prepaid cards in Canada. It’s widely accepted, offers cash back, has budgeting tools, and has lower foreign exchange fees.

Essentials gives you:

  • 1% cash back on groceries, transportation, and dining.

  • 5% interest on all the money you load onto your card.

  • 5% extra cash back at over 1,000 selected merchants.

Although it’s a prepaid card and doesn’t usually build credit, you can subscribe to KOHO’s Credit Building option for $10 a month. This option reports your credit history to Canada’s credit bureaus.

With KOHO Essential, you can get:

  • No annual fee

  • Instant e-transfers

  • Unlimited transactions

  • Free credit score checks

  • Lower foreign exchange fees

For more benefits, you can subscribe to the KOHO Extra plan for $9 a month. This plan offers 1.5% cash back on groceries, transportation, and dining and 0.25% cash back on all other purchases. You still earn 5% interest on your balance, up to 5% extra cash back at selected merchants, and the credit building option costs only $7.

The KOHO Everything plan, costing $19 a month, provides even more benefits, including 2% cash back on groceries, transportation, and dining. Plus, the credit building option is priced at only $5 per month.

Neo Secured Credit

The Neo Secured Credit card stands out as the only secured card offering cash back rewards in Canada. It gives you:

  • Up to 6% cash back on restaurants and bars

  • Up to 4% cash back on your favourite apps, like Netflix, Uber, SkipTheDishes, and more

  • Up to 3% cash back on gas and groceries

  • 0.5% cash back on all other purchases up to $5,000.

With Neo Secured Credit, there’s no annual fee. Plus, it offers guaranteed approval (as long as you meet the three requirements), and with a minimum security deposit of just $50, it’s probably the easiest card to get. Other great features include the ability to adjust your credit limit whenever you want, a spending insights dashboard in their app, and an auto-pay feature to ensure you never miss a bill while building your credit.

You just have to watch out for their purchase interest rate. While it starts at a standard 19.99%, it can go up to 24.99%, depending on your credit and where you live. Be sure to read the details of your contract.

Home Trust Secured Visa Card

The Home Trust Secured Visa Card has a very high approval rate. Almost everyone who applies and can provide the deposit gets approved. Known as one of the best-secured credit cards in Canada, its easy approval process makes it excellent for building credit.

The Home Trust Secured Visa Card is a simple card ideal for those wanting to build their credit without paying an annual fee. With a minimum deposit of $500, users can activate the card and make purchases almost anywhere. Home Trust sends regular reports to both major credit bureaus (Equifax and TransUnion).

The card’s interest rate is 19.99%, which is standard, although some secured cards offer lower rates. You can even lower your interest rate to 14.90% if you are willing to pay an annual fee of $59. Plus, its 2% foreign exchange fee is lower than usual for this type of card when used abroad or online.

Capital One Guaranteed Mastercard® or Guaranteed Secured Mastercard®

The Capital One Guaranteed Mastercard® is easy to get, so many Canadians with bad credit can qualify for a regular credit card. But don’t worry—if you don’t qualify, you’ll get approved for the secured card option. It offers almost guaranteed approval if you meet a few basic requirements. Plus, it comes with travel benefits, purchase assurance, and extended warranty protection.

Both the Capital One Guaranteed and Guaranteed Secured Mastercard® have an annual fee of $59 and a slightly higher standard interest rate of 21.9%. If you only qualify for the secured option, the minimum deposit is only $75. However, the maximum you can deposit is $300, which means that will be your maximum credit limit.

As for travel benefits, the Capital One Guaranteed and Guaranteed Secured Mastercard® include:

  • Car rental collision/loss damage waiver

  • Common carrier travel accident insurance

  • Baggage delay

  • Travel assistance

  • Zero liability

Best credit cards for fair credit in Canada

The following are some of the current best credit-building credit cards in Canada for people with a fair or average credit score:

  • Neo Standard Credit Card

  • SimplyCash Preferred from American Express

  • Tangerine Money-Back Credit Card

  • Scotia Momentum No-Fee Visa Card

Neo Standard Credit Card

The Neo Credit card from Neo Financial is a cash back card with no annual fee and flexible redemption options. It offers competitive cash-back rates compared to other top cards in Canada. This card is highly customizable, with a unique earning structure and features that can be very beneficial based on your spending habits.

Neo Credit offers:

  • Up to 6% cash back on restaurants and bars

  • Up to 4% cash back on your favourite apps, like Netflix, Uber, SkipTheDishes, and more

  • Up to 3% cash back on gas and groceries

  • 0.5% cash back on all other purchases up to $5,000.

The rewards and offers are similar to the secured card option. It comes with no annual fees, and it also lets you adjust your credit limit anytime, provides a spending insights dashboard in its app, and has an auto-pay feature to help you never miss a bill while building your credit.

Just like with the Neo Secured Credit card, you still need to be aware of the purchase interest rate. It starts at a standard 19.99% but can go up to 24.99% depending on your credit and where you live. Make sure to read the details of your contract carefully.

The most notable difference between the two, however, is that Neo Credit allows you to change your rewards by adding flexible perks through subscriptions at any time. These include travel, mind and body, food and drink, and mobile and personal protection.

American Express SimplyCash® Preferred

The American Express SimplyCash® Preferred card is another excellent cashback card. It offers higher earnings on gas and groceries and a good base rate. You can also earn up to $400 in statement credits in the first 10 months. It provides mobile device protection, special experiences, and strong travel insurance coverage.

As a new SimplyCash® Preferred Cardmember from American Express, you can earn a $40 statement credit each month if you spend $750 on your card. This can total up to $400 in statement credits during your first 10 months.

As for cashback, it offers:

  • 4% cash back on eligible gas and grocery purchases

  • 2% cash back on all other purchases with no spending limit

The purchase interest rate is standard at 21.9%. However, this card has a higher $119.88 annual fee, which is charged monthly at $9.99. Also, you must keep in mind that American Express is not as universally accepted as Visa or Mastercard.

Tangerine Money-Back Credit Card

The Tangerine Money-Back Credit Card is a no-annual-fee credit card that lets you choose where to earn the most cash back.

You can earn:

  • 2% cash back with no spending limit on up to three categories of your choice

  • 0.5% cash back on everything else

Out of ten spending categories, including groceries, furniture, restaurants, hotels, gas, recurring bill payments, drug stores, home improvement, entertainment, public transportation and parking, you can pick two to earn 2% cash back with no spending limit. Plus, if you deposit your rewards into a Tangerine Bank savings account, you can choose a third category to earn 2% cash back. After that, you’ll still earn 0.5% cash back on everything else.

With the Tangerine Money-Back Credit Card, you can add up to five people to your account for no extra cost. The purchase interest rate is standard at 19.95%. As a Mastercard, it also comes with purchase assurance and extended warranty protection.

Scotiabank SCENE+ Visa Card

The Scotiabank SCENE+ Visa Card is a great no-annual-fee starter credit card. It rewards you with Scene+ points, which are easy to earn and can be used for travel, shopping, food, drinks, entertainment, or as a statement credit. There’s no annual fee, and additional cards are free.

You can earn:

  • 2X Scene+ points for every dollar spent on groceries at Sobeys, Safeway, FreshCo, and 1,100+ eligible grocery stores across Canada

  • 2X Scene+ points per dollar at Home Hardware, Home Building Centre, Home Hardware Building Centre, Home Furniture locations and online

  • 2X Scene+ points per dollar at Cineplex theatres or at cineplex.com

  • 1X Scene+ points per dollar on all other eligible everyday purchases

It has a purchase interest rate of 20.99% and a 22.99% interest rate on cash advances, and it requires a minimum credit limit of $500. You can also up to 25% off on car rentals at participating AVIS and Budget locations in Canada and the U.S.

Best credit cards for students in Canada

  • PC Financial® Mastercard®

  • BMO CashBack Mastercard®

  • BMO AIR MILES®† Mastercard®

  • TD Rewards Visa Card

PC Financial® Mastercard®

The PC Financial Mastercard is a great no-annual-fee starter card for students who love to shop at stores like Shoppers Drug Mart, Loblaws, No Frills, or any of the other 2,500 stores associated with the PC Optimum™ program. This card has a minimum earn rate of 10 points per dollar (equal to 1% in rewards), making it more rewarding than most basic cash back or points cards, which usually start at 0.5% for everyday purchases.

Students can earn:

  • Up to 45 PC Optimum™ points for every dollar you spend at Shoppers Drug Mart®

  • Up to 30 PC Optimum™ points for every dollar you spend at participating grocery stores

  • Up to 30 PC Optimum™ points for every dollar you spend at Joe Fresh stores

  • At least 30 PC Optimum™ points per litre when you fuel up at Esso™ and Mobil™ stations

  • 10 PC Optimum™ points for every dollar spent everywhere else

Students can redeem their points towards:

  • Groceries at participating stores where President’s Choice® products are sold

  • Gas, fuel, and car wash rewards at Esso™

  • Essentials at Shoppers Drug Mart®

As a Mastercard, this card comes with purchase assurance and extended warranty protection.

BMO CashBack Mastercard®

This credit card has three features that students love:

  1. No annual fees

  2. Easy-to-earn rewards

  3. No income requirement

With the BMO CashBack Mastercard®, students can earn:

  • 3% cash back on grocery purchases

  • 1% cash back on recurring bill payments

  • 0.5% unlimited cash back on all other purchases

While there is a $500 spending limit on the card’s two bonus categories, the limit resets every 30 days. Plus, you can apply your earned cash back to your statement credits.

Redeeming your cash back is very simple; you can do it anytime for as little as $1—no waiting months or a year. This card offers purchase and extended warranty protection and discounts on rental cars from National and Alamo locations.

BMO AIR MILES®† Mastercard®

If you’re more interested in earning air miles than cash back, then this other student credit card option from BMO may be better for you. It also offers no annual fees, easy-to-earn rewards, and no income requirement.

With the BMO AIR MILES®† Mastercard®, students can earn:

  • 3x the Miles for every $25 spent at participating AIR MILES Reward Partners

  • 2x the Miles for every $25 spent at any eligible grocery store

  • 1x the Miles for every $25 in credit card purchases

Plus, students can use their AIR MILES®† Reward Miles for more than just travel. You can also redeem them for merchandise, events, attractions, and AIR MILES Cash Rewards.

Just like with the BMO CashBack Mastercard®, this card offers purchase and extended warranty protection and discounts on rental cars from National and Alamo locations.

TD Rewards Visa Card

If you’re a student who travels often – for holidays, spring break, or summer trips – the TD Rewards Visa Card might be perfect for you. This no-annual-fee card earns TD Points that you can use for flights, hotel stays, car rentals, eGift cards, education credits, cash credits, or almost anything on Expedia, one of the biggest travel websites.

You can earn:

  • 4 TD Rewards Points for every $1 you spend when you book travel through Expedia® For TD

  • 3 TD Rewards Points for every $1 you spend on groceries and restaurants

  • 2 TD Rewards Points for every $1 you spend on regularly recurring bill payments set up on your account

  • 1 TD Rewards Point for every $1 you spend on other everyday purchases

Some added perks include:

  • Redeem your TD Rewards Points for your next trip at ExpediaForTD.com and get access to exclusive deals

  • Link your eligible card to earn 50% more TD Rewards Points and Stars, and redeem points to earn even more Stars, at Starbucks

  • Redeem your TD Rewards Points towards purchases at Amazon with Amazon Shop with Points.

This card provides purchase and extended warranty protection and discounts on rental cars from Avis and Budget locations.

Credit card options for Canadians with bad credit

These days, having a credit card is not only convenient but often needed for many transactions. However, getting a credit card can be tough for people with a bad or limited credit history, as regular credit cards usually need a fair or good credit score to qualify. Fortunately, there are still credit card options for those with no or poor credit history.

Secured credit cards

Secured credit cards work like regular credit cards, but you need to make a cash deposit to get the card. This deposit acts as security for the lender and can be used to pay your debt if you don’t pay your bill.

Unsecured credit cards

Unsecured credit cards are traditional credit cards where you’re approved for a credit limit, and it works as a line of credit. These cards have interest rates because you’re borrowing money from the lender and then paying it back.

Guaranteed approval credit cards

Guaranteed approval credit cards are special types of credit cards where approval is almost certain as long as you meet a few basic requirements. They can be secured or unsecured. These cards usually come with a set credit limit and function as a line of credit. They often have higher interest rates because the lender is taking on more risk by approving applicants with less stringent criteria.

Prepaid credit cards

Prepaid credit cards work like regular credit cards, but you use your own money loaded onto the card instead of borrowing. You can use the card like a normal credit card and sometimes even earn cash back and points on your spending.

What type of credit card do you need to build credit?

There are two main types of credit cards for building credit: secured credit cards and unsecured credit cards. Both secured and unsecured credit cards report your activity to the Canadian credit bureaus, helping you build your credit history. However, which one you qualify for will depend on your credit score.

An unsecured credit card is the typical card you think of when you think about a credit card. You apply, and the lender checks your income, credit score, and other factors to decide your credit limit and approval. There’s no collateral, and you pay off your purchases each month, sometimes earning rewards like points or cash back. For an unsecured credit card, you typically need either a fair or good credit score or higher.

If you have a bad credit score, no credit score, or you’ve been through bankruptcy, you might not qualify for an unsecured card. In that case, you can opt for a secured credit card.

Secured credit cards require a cash deposit, which usually equals your credit limit. This deposit acts as collateral, making it less risky for lenders. That’s why secured cards are available to almost everyone, including those with bad credit, and they typically have no income requirements.

Some unsecured cards are available for people with average or fair credit. But if you have no credit or bad credit, starting with a secured card is usually the best way to improve your credit score.

How to use a credit card to build your credit history

It’s pretty easy to build credit in Canada with a credit card. All you really need to do is use the card regularly and pay off the full balance each month. Here’s how to start:

Research your options

Look for a card through your bank or find one with good interest rates and rewards. Try to choose cards with low or no annual fees. You can look for cards with low or zero introductory interest rates, but check when the introductory period ends so you’ll know when the rate will increase. Finally, make sure it reports your payment history back to the credit bureaus.

Use the card often

After getting approved, use the card frequently and pay off the balance. Make small, frequent purchases without spending more than you have in your checking account. Take advantage of cashback offers, especially for travel, gas, and food. These can help you save more money while building credit.

Pay your bill on time

One of the fastest ways to build credit in Canada is to always pay your credit card bill on time each month. If you can’t pay it off completely, always pay at least the minimum amount. However, paying more will reduce your debt faster and save on interest. Also, keep your credit utilization rate at or below 30%. For example, if your credit limit is $1,000, keep your balance at $300 or less. A higher credit utilization ratio will negatively affect your credit score.

What is a credit score?

Canadian credit scores are a number between 300 and 900, which shows how reliable you are at repaying debt. The higher your score, the more lenders trust you to pay back what you owe.

  • Poor Credit (300-559): A score in this range signals to lenders that you may be a risky borrower due to a history of late payments, defaults, or bankruptcies. Access to credit will be harder, and interest rates will be higher if you get credit.

  • Fair Credit (560-659): Lenders might approve loans with fair credit, but the terms will be less favourable, with higher interest rates than those with better scores.

  • Good Credit (660-724): A good credit score makes it easier to get approved for financial products and enjoy lower interest rates, saving you money over time.

  • Very Good Credit (725-759): In this range, lenders see you as a low-risk borrower and offer more competitive interest rates and terms.

  • Excellent Credit (760-900): With an excellent score, you’re likely to get the best interest rates and terms available, and lenders may offer you premium credit products.

How is your credit score determined?

Your credit score is calculated based on several factors:

  • How long you’ve had credit

  • How long each credit account has been on your report

  • If you carry a balance on your credit cards

  • If you miss payments regularly

  • The amount of your outstanding debts

  • Being close to, at, or above your credit limit

  • The number of recent credit applications

  • The type of credit you’re using

  • If your debts have been sent to a collection agency

  • Any record of insolvency or bankruptcy

What does a bad credit score mean in Canada?

Simply put, a bad credit score is a score between 300 and 559.

With a score in this range, it’s hard to get unsecured credit. If your score is in this range, you’ll likely need to provide collateral, making a loan secured and allowing the lender to keep the collateral if you can’t pay. Alternatively, you might need a co-signer with a better credit score who will be responsible for the debt if you can’t pay.

The same goes for credit cards; with a score below 560, you’ll likely need to look for a secured credit card with a cash deposit requirement to open a credit card account.

But that’s not all. Having a bad credit score can even affect things in your personal life, such as:

  • Financing a new vehicle

  • Buying a new home

  • Renting an apartment

  • Qualifying for some jobs

This is why it’s important to fix bad credit as soon as you can.

What does “build credit” mean?

Your credit score is based on the information in your credit report. To build your credit, you need activities like credit card and loan payments reported to credit bureaus. Opening a credit card and paying the balance on time regularly improves your credit rating and shows creditors you’re reliable.

However, having a credit card can also hurt your score if you miss or are late with payments. Even if you pay on time, accumulating debt can lower your score. The best way to build credit is to have a strong credit history of positive activities, like paying on time, with creditors such as banks and credit unions.

How long does it take to build credit in Canada?

People often wonder how long it takes to build credit in Canada. The Financial Consumer Agency of Canada says it takes 30 to 90 days for updates to appear on your credit report.

However, this doesn’t mean your credit score will become “excellent” after just a month or two of reducing debt and making on-time payments. Building a good credit score is about making consistent, positive changes over time. Remember that high debt and a history of missed payments can slow down your progress.

Improving your credit score is like running a marathon; you need to keep up good habits regularly. While there are quick steps you can take to boost your score, it’s more about staying committed to long-term changes and smart financial habits.

Tips for building credit with a credit card

Here are six tips to help you improve your credit with a credit card and manage your finances well.

1. Develop a payment routine

The most important way to build credit is to always pay your credit card bill on time. Late payments can hurt your credit score and result in extra fees.

Building a good credit score with your credit card means proving to lenders that you can manage money responsibly. One of the best ways to do this is by creating a regular payment routine.

Consistently paying on time can greatly improve your credit score because it shows you can handle loans or credit responsibly. It also means you’ll be building credit without debt. Plus, a good payment history can lead to lenders offering you loans with lower interest rates and higher credit limits in the future.

Tips for developing a payment routine

  • Automated payments: Set up automatic payments with your bank or lender to ensure that the minimum amount due or another specified amount is withdrawn from your bank account on the due date.

  • Calendar reminders: Use digital calendar alerts to remind you a few days before your payment is due. This gives you time to transfer funds or make any necessary arrangements.

  • Handling missed payments: If you miss a payment, pay it as soon as you can. Many lenders don’t report late payments to credit bureaus until they are at least 30 days overdue.

2. Avoid keeping a high balance on your card

Another key tip is to keep your credit usage low. This helps in two ways: it keeps your debt manageable and improves your credit utilization rate, which can boost your credit score.

Try to use less than 30% of your total credit limit. For instance, if your card has a $1,000 limit, aim to keep your balance under $300. Keeping your credit utilization rate low shows lenders that you don’t rely heavily on credit, which can enhance your credit score. By only spending what you can easily pay off and maintaining low balances, you show that you manage money responsibly.

You might also set up alerts on your phone to prevent overspending. These alerts can help you monitor how much of your credit limit you’re using and notify you when you’re approaching a certain amount, like the 30% utilization level.

3. Regularly check your credit progress

Building good credit isn’t just about using your credit card wisely; it also involves regularly checking your credit score and reports. By frequently checking your credit report, you can catch errors or signs of identity theft early. Addressing these issues quickly can minimize their impact on your credit score.

Many credit card companies provide free credit score updates, allowing you to track changes over time. You can also use free services like Credit Karma or Borrowell to access your reports and scores.

4. Use your card wisely

Credit cards can be great tools for rebuilding credit when used wisely. By developing good habits, you can improve your credit and show that you are a reliable borrower.

Here’s how to use them effectively:

  • Small, manageable purchases: Use your credit cards for small purchases you can easily pay off, like gas or groceries. This shows you can handle credit responsibly.

  • Full payment strategy: Try to pay off your credit card balance in full every month to avoid interest charges. This shows creditors that you use credit sensibly and don’t rely on it to fill budget gaps.

  • Avoid maxing out: Don’t max out your credit cards, as it can lower your credit score. Keep a buffer between your balance and credit limit to show you are managing your finances well.

  • Credit limit increases: If you have a good history with your credit card company, ask for a credit limit increase. This can lower your utilization ratio by giving you more available credit. Just make sure not to increase your spending along with the limit.

5. Limit credit applications

When you apply for new credit, such as a credit card, car loan, or mortgage, the lender will usually conduct a “hard inquiry” on your credit report to determine your creditworthiness.

One hard inquiry might slightly lower your credit score, but several in a short time can be more harmful. This can make it look like you’re urgently seeking credit or taking on more debt than you can handle.

Only apply for new credit when necessary or when it makes sense, like when you’re shopping for a mortgage or car loan. Research the lender’s requirements beforehand to reduce the chance of being rejected and having an unnecessary inquiry on your report.

6. Be patient

Building a positive credit history takes time and doesn’t happen overnight. Every on-time payment and keeping your credit use low helps improve your credit bit by bit, showing lenders you can manage credit responsibly over time.

The key to building a good credit score is to use your credit card wisely. Only buy what you can pay off each month, and always pay your bills on time. Progress may be slow, but each timely payment boosts your score.

Don’t get discouraged by small dips in your score from things like applying for a new card or making a big purchase. Just be patient and stay focused, and your consistent efforts will lead to a better credit score over time.

Build your credit history with the KOHO Credit Building Card!

Are you ready to start building up your credit score? You can begin today with KOHO’s affordable, interest-free credit-building tools:

KOHO Line of Credit

Open a KOHO line of credit, where a small amount of money is set aside and reported to Equifax as a monthly payment. You only need to pay a monthly fee on time each month to build your credit score and history.

KOHO Flexible Line of Credit

Similar to a secured credit card, you use your own money as a deposit to set a credit limit (between $30 to $500) and make withdrawals. Each on-time monthly repayment is reported to Equifax, helping to improve your credit.

FAQs for building credit with a credit card

What credit card builds credit the fastest?

Secured credit cards can help build credit quickly because they are easier to get, and they report your payments to credit bureaus.

How much of a $300 credit limit should I use?

To keep your credit utilization low, ideally around 30% or below, aim to have less than $90 of your $300 credit limit used.

How long does it take to build your credit to 700 with a credit card?

Depending on your starting point and financial habits, it can take several months to a few years to build your credit score to 700.

Do credit cards actually build credit?

Yes, using credit cards responsibly by making on-time payments and keeping balances low can help build your credit.

Note: KOHO product information and/or features may have been updated since this blog post was published. Please refer to our KOHO Plans page for our most up to date account information!

About the author

Grace is a communications expert with a passion for storytelling. This hobby eventually turned into a career in various roles for banks, marketing agencies, and start-ups. With expertise in the finance industry, Grace has written extensively for many financial services and fintech companies.

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