The world of personal finance can be complex and overwhelming, especially for those who are just starting out. One of the most critical aspects of financial management is credit, which is a measure of a person’s creditworthiness based on their past credit behavior. Your credit score plays a significant role in your financial life, affecting your ability to secure loans, credit cards, and other financial products.
In Canada, credit scores range from 300 to 900, with higher scores indicating better creditworthiness. A credit score of 600 or lower is generally considered a bad credit score, which can make it difficult to secure favorable credit products. However, there are several products available in Canada that can help you rebuild your credit and improve your credit score over time.
In this article, we will explore some of the best credit products for bad credit in Canada, including secured credit cards, credit builder loans, and prepaid credit cards. We will also discuss the minimum credit score required to apply for these products and provide tips for improving your credit score over time. Whether you’re just starting out or looking to rebuild your credit after a financial setback, this guide will help you navigate the world of credit products and achieve your financial goals.
What Is a Bad Credit Score In Canada?
In Canada, credit scores range from 300 to 900, with higher scores indicating better creditworthiness. A credit score below 600 is generally considered a bad credit score. This indicates that the person has a history of late or missed payments, high credit utilization, and other negative credit behaviors that suggest a higher risk of defaulting on loans or credit obligations. With a bad credit score, it may be difficult to qualify for credit cards or loans with favorable terms, and lenders may charge higher interest rates or require security deposits to offset the risk. It’s important to monitor your credit score regularly and take steps to improve it if it’s low.
Bad credit refers to a poor credit history or low credit score that indicates to lenders that a borrower is a high credit risk. Your credit score is a numerical representation of your creditworthiness and is based on several factors, including your payment history, credit utilization, length of credit history, and types of credit.
If you have bad credit, it means that you have a low credit score and may have a history of missed or late payments, defaulting on loans, or having a high level of debt relative to your income. This can make it difficult to obtain credit, including credit cards, loans, and mortgages, and may result in higher interest rates and fees when you do get approved.
Having bad credit can also impact other areas of your life, such as employment opportunities, housing applications, and insurance rates. It’s essential to monitor your credit score regularly and take steps to improve it if you have bad credit. This can include making payments on time, paying down debt, and disputing any errors on your credit report.
Best Credit Cards For Bad Credit In Canada
If you have bad credit, you may find it challenging to get approved for a credit card in Canada. However, there are some options available that can help you build or rebuild your credit. Here are some of the best credit cards for bad credit in Canada:
Secured Credit Cards: These credit cards require a security deposit, typically equal to the credit limit, which acts as collateral. This reduces the risk for the issuer and makes it easier to get approved. Some popular secured credit cards in Canada include the Home Trust Secured Visa Card and the Scotiabank Passport™ Secured Visa* Card.
Low-Interest Credit Cards: Low-interest credit cards offer lower interest rates than regular credit cards, making them a good choice for people with bad credit who are trying to pay off their balance. Some popular low-interest credit cards in Canada include the BMO Preferred Rate Mastercard and the CIBC Select Visa Card.
Guaranteed Approval Credit Cards: These credit cards offer guaranteed approval, regardless of your credit score. However, they often come with high fees and interest rates. Some popular guaranteed approval credit cards in Canada include the Refresh Financial Secured Visa Card and the Capital One Guaranteed Mastercard.
Prepaid Credit Cards: Prepaid credit cards are another option for people with bad credit. They work like regular credit cards, but you load them with your own money. They don’t require a credit check and can help you build credit if they report to the credit bureaus. Some popular prepaid credit cards in Canada include the Canada Post Reloadable Visa Prepaid Card and the KOHO Prepaid Visa.
How Can I Fix My Bad Credit?
If you have bad credit, it’s important to take steps to improve your credit score. Here are some ways to fix your bad credit:
Pay Your Bills on Time: Payment history is one of the most significant factors that affect your credit score. Make sure to pay all of your bills, including credit card bills, loan payments, and utility bills, on time every month.
Reduce Your Debt: High levels of debt can also negatively impact your credit score. Try to pay down your debt as much as possible, starting with the debts that have the highest interest rates.
Dispute Any Errors on Your Credit Report: Errors on your credit report can impact your credit score negatively. Review your credit report for any mistakes, such as accounts that aren’t yours or accounts with inaccurate information. If you find errors, dispute them with the credit bureau.
Use Credit Responsibly: Use your credit cards responsibly, keeping your balance low and paying off your balance in full each month. Don’t apply for too many credit cards or loans at once, as this can negatively impact your credit score.
Consider a Credit-Building Program: Some financial institutions offer credit-building programs that can help you improve your credit score. These programs typically require you to make regular payments and may offer a secured credit card or loan to help you build credit.
Improving your credit score takes time and effort, but it’s worth it in the long run. A good credit score can help you get approved for credit at lower interest rates, making it easier and less expensive to borrow money when you need it.
Why do credit reports have accounts closed but balances pending?
It’s not uncommon to see accounts listed as “closed” on your credit report with a balance still pending. This can occur for several reasons.
Firstly, it’s important to understand that the information on your credit report is reported by third-party lenders and creditors. If an account is closed, it simply means that the lender or creditor has closed the account and it’s no longer active. However, the balance may still be outstanding, and you’re still responsible for paying it.
Secondly, in some cases, an account may be closed by the creditor or lender, but there may still be a balance due because the interest, fees, or charges continue to accrue. For example, if you have a credit card account with a balance and the account is closed, interest charges will continue to accrue until the balance is paid in full.
Finally, it’s possible that there may be an error or mistake on your credit report. In some cases, a closed account may still be listed as open, or a balance may be reported inaccurately. If you believe there’s an error on your credit report, you should contact the credit bureau and the creditor or lender to have it corrected.
In any case, if you have a closed account with a balance still pending, it’s essential to continue making payments on time to avoid any negative impact on your credit score. By paying off the balance and practicing responsible credit behavior, you can improve your credit score over time and achieve your financial goals.
How To repay for a closed account?
If you have a closed account with an outstanding balance, you’re still responsible for paying off the debt. Here are some steps you can take to repay the debt:
Check your credit report: Start by reviewing your credit report to see which accounts are listed as closed with a balance due. You can obtain a free copy of your credit report from each of the three major credit bureaus (Equifax, TransUnion, and Experian) once per year.
Contact the creditor: Once you know which account(s) have an outstanding balance, contact the creditor to find out the current balance and the payment options available. The creditor may be willing to set up a payment plan or negotiate a settlement.
Make a plan to pay off the debt: Once you have all the information, create a plan to pay off the debt. This may involve making monthly payments or paying off the balance in a lump sum if you have the funds available. Make sure to prioritize the debt and make payments on time to avoid further damage to your credit score.
Keep track of your progress: As you make payments, keep track of your progress and check your credit report regularly to ensure that the account is reported accurately. Once the debt is paid off, the account should be reported as “paid in full” or “settled in full” on your credit report.
In summary, repaying a closed account with a balance due involves contacting the creditor, making a plan to pay off the debt, and keeping track of your progress. By paying off the debt, you can improve your credit score and regain control of your financial life.
How Can I Remove Late/Missed Payments History From Credit Reports?
Removing missed or late payment history from your credit report can be challenging, especially if the information reported is accurate. However, there are a few strategies you can try to remove negative payment history from your credit reports:
Dispute errors: Check your credit report for any errors, such as late payments that were reported inaccurately. If you find any errors, you can dispute them with the credit bureau and provide supporting documentation to have them corrected or removed from your credit report.
Request a goodwill adjustment: If you have a history of timely payments but missed a payment due to a one-time hardship or mistake, you can ask the creditor to remove the late payment from your credit report as a goodwill gesture. This approach is more likely to be successful if you have a good relationship with the creditor.
Negotiate a pay-for-delete agreement: If you have an account in collections or charge-off, you can negotiate with the creditor or collection agency to remove the negative payment history in exchange for payment. A pay-for-delete agreement is not guaranteed, but some creditors may be willing to remove the negative payment history to settle the account.
Wait for negative items to fall off: Late payments will typically remain on your credit report for up to seven years from the original delinquency date. After that time, they should automatically fall off your credit report. However, the impact of negative payment history on your credit score will diminish over time as the information ages.
It’s essential to keep in mind that removing negative payment history from your credit report may take time, and there are no guarantees of success. However, taking steps to improve your payment history going forward can help improve your credit score over time. Additionally, working with a reputable credit counseling agency can help you develop a plan to manage your debts and improve your credit score.
Do Missed Payments Still Stay on record after the balance is paid off and closed?
Yes, missed payments can stay on your credit report even after the balance is paid off and the account is closed. Late payments can have a negative impact on your credit score and can stay on your credit report for up to seven years from the original delinquency date.
Paying off a debt that is already in collections or charged off can improve your credit score over time, but the missed payment history will still show on your credit report. However, the negative impact of missed payments will decrease over time as they age on your credit report.
It’s important to note that paying off a debt that has gone into collections or been charged off does not automatically remove it from your credit report. It will still appear on your credit report as a negative item, but it will show that the balance has been paid. However, paying off the debt may improve your creditworthiness and make it easier to qualify for credit in the future.
To maintain a good credit score, it’s important to make all your payments on time and avoid missing payments in the future. If you are struggling to make payments, contact your creditors to discuss options for repayment or consider working with a credit counseling agency to help you manage your debt.
How Long Will It take for my score to jump from 500-650 levels?
It’s difficult to give a precise timeline for how long it will take to increase your credit score from 500 to 650, as it depends on a variety of factors such as the cause of the low score, your credit utilization, payment history, and the types of credit you have. However, generally speaking, improving your credit score is a gradual process that takes time and consistent effort.
If you make all your payments on time, reduce your credit card balances, and avoid opening new credit accounts, you may begin to see an improvement in your credit score in as little as three to six months. However, if you have a history of missed payments, defaults, or collections, it may take longer to see a significant increase in your score.
It’s important to note that there is no quick fix for improving your credit score, and it takes consistent effort and responsible credit behavior over time. I
n addition to making payments on time and reducing your credit card balances, you can also improve your credit score by checking your credit report for errors and disputing any inaccuracies, avoiding opening too many new credit accounts at once, and keeping your oldest credit accounts open to show a longer credit history. With time and effort, you can improve your credit score and open up more credit opportunities with better rates and terms.
Best Products To Help Improve Your Bad Credit Immediately
It’s important to note that there’s no quick fix for bad credit. Improving your credit score takes time and effort, but there are some products that can help you improve your credit over time. Here are some of the best products to improve your bad credit immediately:
Secured Credit Cards: A secured credit card requires a deposit that acts as collateral for the credit limit. This means that even if you have bad credit, you can still get approved for a secured credit card. By using a secured credit card responsibly and making payments on time, you can start building a positive credit history.
Credit-Builder Loans: Credit-builder loans are designed to help people with bad credit build credit. These loans work by depositing the loan amount into a savings account, which you’ll repay over time. Once you’ve paid off the loan, you’ll have access to the savings account, which can help you build an emergency fund.
Credit Monitoring Services: A credit monitoring service can help you keep track of your credit score and credit report. These services can alert you to any changes in your credit report and provide tips on how to improve your credit score.
Debt Consolidation Loans: If you have high levels of debt, a debt consolidation loan can help you consolidate your debt into one monthly payment. This can help you pay off your debt faster and improve your credit score over time.
It’s important to use these products responsibly and make payments on time to see an improvement in your credit score. Remember, there’s no quick fix for bad credit, but with time and effort, you can improve your credit score and financial well-being.
Best Secured Credit Cards With 100% Approval Rate
Secured credit cards are a good option for people with bad credit, as they require a deposit that acts as collateral for the credit limit. Here are some of the best-secured credit cards with a 100% approval rate:
Home Trust Secured Visa Card: The Home Trust Secured Visa Card is a popular choice for people with bad credit. It has a low annual fee and a low-interest rate. The minimum deposit is $500, and the credit limit is equal to the deposit.
Capital One Guaranteed Secured Mastercard: The Capital One Guaranteed Secured Mastercard is designed for people with bad credit. It has no annual fee and a low-interest rate. The minimum deposit is $75, and the credit limit is equal to the deposit.
Refresh Financial Secured Visa: The Refresh Financial Secured Visa is a good option for people with bad credit who want to improve their credit score. It has a low annual fee and a low-interest rate. The minimum deposit is $200, and the credit limit is equal to the deposit.
Peoples Trust Secured Mastercard: The Peoples Trust Secured Mastercard is a good option for people with bad credit who want to build credit. It has no annual fee and a low-interest rate. The minimum deposit is $500, and the credit limit is equal to the deposit.
Remember, while secured credit cards have a high approval rate, you still need to make payments on time and use the card responsibly to see an improvement in your credit score.
Best Prepaid Credit Cards For Bad Credit
Prepaid credit cards are another option for people with bad credit. They work like a regular credit card, but you load money onto the card before you can use it. Here are some of the best prepaid credit cards for people with bad credit:
KOHO Prepaid Visa Card: The KOHO Prepaid Visa Card is a good option for people with bad credit who want a prepaid credit card. It has no annual fee and offers cash back rewards. You can load money onto the card through direct deposit, e-transfer, or debit card.
STACK Prepaid Mastercard: The STACK Prepaid Mastercard is a popular choice for people with bad credit. It has no annual fee and offers cash back rewards. You can load money onto the card through direct deposit, e-transfer, or bank transfer.
Brim Prepaid Mastercard: The Brim Prepaid Mastercard is a good option for people with bad credit who want a prepaid credit card. It has no annual fee and offers rewards points. You can load money onto the card through direct deposit, e-transfer, or bank transfer.
American Express Prepaid Card: The American Express Prepaid Card is another option for people with bad credit. It has no annual fee and offers fraud protection. You can load money onto the card through direct deposit or bank transfer.
Remember, prepaid credit cards don’t report to the credit bureaus, so using one won’t help you improve your credit score. However, they can be a good option if you want to avoid high fees and interest rates associated with traditional credit cards.
Best Guaranteed Approval Credit Cards
Guaranteed approval credit cards are designed for people with bad credit or no credit history, and they typically have higher fees and interest rates than traditional credit cards. Here are some of the best guaranteed approval credit cards:
Refresh Financial Secured Visa: The Refresh Financial Secured Visa is a popular choice for people with bad credit. It requires a security deposit of $200 to $10,000 and has a low annual fee. It also reports to the credit bureaus, which can help you build credit.
Home Trust Secured Visa Card: The Home Trust Secured Visa Card is a good option for people with bad credit. It requires a security deposit of $500 to $10,000 and has a low annual fee. It also offers a low interest rate and cash back rewards.
Capital One Guaranteed Secured Mastercard: The Capital One Guaranteed Secured Mastercard is designed for people with bad credit. It requires a security deposit of $75 to $300 and has no annual fee. It also reports to the credit bureaus, which can help you build credit.
Guaranteed Mastercard from Capital One: The Guaranteed Mastercard from Capital One is designed for people with bad credit or no credit history. It has a low credit limit and a high interest rate, but it can help you build credit.
Remember, while guaranteed approval credit cards are easier to get than traditional credit cards, they often have higher fees and interest rates. It’s important to use them responsibly and make payments on time to avoid damaging your credit further.
Best Low-Interest Credit Cards In Canada For Bad Credit Score
Unfortunately, low-interest credit cards are typically not available to people with bad credit scores. Credit cards with lower interest rates are usually reserved for people with good or excellent credit histories. However, there are some credit cards available to people with bad credit that may offer lower interest rates than other options. These cards may also have higher fees and lower credit limits. Here are some options:
Home Trust Secured Visa Card: The Home Trust Secured Visa Card offers an interest rate of 14.90% on purchases and cash advances, which is lower than some other secured credit cards. It requires a security deposit of at least $500 and has an annual fee of $59.
Refresh Financial Secured Visa: The Refresh Financial Secured Visa has an interest rate of 17.99% on purchases and cash advances. It requires a security deposit of at least $200 and has an annual fee of $12.95.
Capital One Guaranteed Secured Mastercard: The Capital One Guaranteed Secured Mastercard has an interest rate of 19.80% on purchases and cash advances. It requires a security deposit of at least $75 and has no annual fee.
Remember, these credit cards are designed to help you rebuild your credit, not to offer low interest rates. It’s important to use them responsibly and make payments on time to avoid damaging your credit further. Once your credit score improves, you may be eligible for credit cards with lower interest rates.
Of All the Products listed above which ones can help increase my credit score quickly?
Improving your credit score is a gradual process that takes time and responsible credit behavior. However, some of the products listed above can help you improve your credit score more quickly than others. Here are a few options:
Secured credit cards: Secured credit cards can help you build credit quickly because they typically report to the credit bureaus every month. By making on-time payments and keeping your credit utilization low, you can show lenders that you are responsible and improve your credit score over time.
Credit builder loans: Credit builder loans can also help you improve your credit score quickly. With a credit builder loan, you borrow a small amount of money and make payments over a set period of time. Once you’ve paid off the loan, you receive the money. Credit builder loans are designed to help you establish a positive payment history and show lenders that you can manage credit responsibly.
Payday loans: While payday loans are not a recommended option, they can help you improve your credit score if you use them responsibly. Payday loans typically do not require a credit check, so they can be a good option if you have bad credit. However, they can also have very high interest rates and fees, so it’s important to pay them off quickly and avoid taking out more loans than you can afford.
Remember, the best way to improve your credit score is to practice responsible credit behavior over time. This includes paying your bills on time, keeping your credit utilization low, and avoiding new credit applications unless necessary. By taking small steps and being patient, you can improve your credit score and gain access to more favorable credit products in the future.
Final Words
In conclusion, having a bad credit score can be a significant obstacle when it comes to securing credit products and achieving financial goals. However, there are several products available in Canada that can help you rebuild your credit and improve your credit score over time. It’s important to choose the right product based on your unique financial situation and credit history.
Whether you opt for secured credit cards, credit builder loans, or prepaid credit cards, it’s essential to practice responsible credit behavior to achieve the best results. This includes making on-time payments, keeping your credit utilization low, and avoiding unnecessary credit applications. By being patient and consistent, you can gradually improve your credit score and gain access to more favorable credit products.
It’s also crucial to monitor your credit score regularly and address any issues or errors that may be affecting your creditworthiness. By taking control of your credit and finances, you can achieve your financial goals and enjoy a brighter financial future. Remember, the key to success is to be persistent, stay focused on your goals, and practice good credit habits consistently.