Bad credit doesn’t have to mean bad options.

In fact, it’s likely that 1 in 5 Canadians has a credit score below 600—but that doesn’t mean your financial future is locked in. With the right tools, you can start rebuilding your credit, unlocking better interest rates, and even qualifying for a mortgage sooner than you think.

Enter secured credit cards: your best first step to better credit. Whether you’ve faced missed payments, a consumer proposal, or just don’t have much credit history, the right card can help you start fresh—and fast.

In this guide, you’ll learn:

• The difference between secured, unsecured, and credit-building prepaid cards
• The best secured credit cards available now—including low deposit and no-annual-fee picks
• How homeowners can leverage equity to rebuild credit even faster

Psst — want to rebuild your credit faster as a homeowner? Lotly’s home equity consolidation loans can significantly lower your interest rates, reduce monthly payments, and immediately improve your credit utilization ratio, speeding up your path to better credit. Book a free consultation today to learn more.

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Understanding credit cards for bad credit in Canada

Before diving into specific card recommendations, it's essential to understand what "bad credit" means in the Canadian context and how credit cards can help you rebuild your credit.

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What is considered "bad credit" in Canada?

In Canada, credit scores range from 300 to 900, with higher scores indicating better creditworthiness. Generally, credit scores are categorized as follows:

• Excellent: 760-900
• Very Good: 725-759
• Good: 660-724
• Fair: 560-659
• Poor/Bad: Below 560

If your score falls below 560, you're considered to have bad credit, which can make it challenging to get approved for traditional credit products. Common reasons for bad credit include late or missed payments, high credit utilization, bankruptcy, consumer proposals, or limited credit history.

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Types of credit cards available for bad credit

When you have bad credit in Canada, you generally have three main options:

1. Secured credit cards: These cards require a security deposit that typically equals your credit limit. The deposit acts as collateral, reducing the risk for the issuer and making these cards accessible even with poor credit. Most secured cards report to credit bureaus, helping you build credit with responsible use.

2. Unsecured credit cards for bad credit: These don't require a deposit but often come with higher interest rates, lower credit limits, and additional fees. They're harder to qualify for with bad credit, but do exist for those with borderline scores.

3. Prepaid cards with credit-building features: While traditional prepaid cards don't build credit, some newer options offer credit-building features by reporting certain activities to credit bureaus.

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Secured credit cards — an excellent option for rebuilding credit

For most Canadians with bad credit, secured credit cards offer the most accessible and effective path to rebuilding credit.

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How secured credit cards work

Secured credit cards function similarly to regular credit cards with one key difference: you provide a security deposit upfront. Here's how they work:

• You deposit a sum of money with the credit card issuer (typically $200-$500 to start)
• This deposit becomes your credit limit (or determines your limit)
• You use the card like a regular credit card, making purchases and payments
• The issuer reports your payment activity to credit bureaus (typically Equifax and TransUnion)
• Your deposit is refundable when you close the account in good standing or upgrade to an unsecured card

The security deposit reduces the lender's risk, allowing them to approve applicants with poor credit histories. With responsible use, secured cards can help improve your credit score over time.

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Top secured credit cards for Canadians with bad credit

Based on current offerings in 2025, here are the best secured credit card options for Canadians with bad credit:

1. Neo Secured Mastercard

• Minimum Deposit: $50
• Annual Fee: $0
• Interest Rate: 24.99% (26.99% for cash advances)
• Credit Limit: Equal to your deposit
• Application Requirements: Canadian residency, age of majority, security deposit
• Credit Bureau Reporting: Reports to both Equifax and TransUnion
• Special Features: Cashback rewards program, user-friendly app for tracking spending

The Neo Secured Mastercard stands out for its low minimum deposit requirement and the absence of an annual fee. It's one of the few secured cards that offers rewards, making it more similar to traditional credit cards. The app makes it easy to track your spending and payments, which is helpful when you're working to rebuild credit.

2. Home Trust Secured Visa Card

• Minimum Deposit: $500
• Annual Fee: $0 (or $59 for a lower interest option)
• Interest Rate: 19.99% (or 14.99% with annual fee)
• Credit Limit: $500-$10,000 (equal to deposit)
• Application Requirements: Age of majority, income verification, not in active bankruptcy
• Credit Bureau Reporting: Reports to both Equifax and TransUnion
• Special Features: Option to choose between no annual fee or lower interest rate

The Home Trust Secured Visa offers flexibility with two different options: a no-annual-fee card with a standard interest rate, or a lower interest rate option with an annual fee. This allows you to choose based on your spending habits and whether you typically carry a balance.

3. Capital One Secured Mastercard

• Minimum Deposit: $75 or $300 (depending on creditworthiness)
• Annual Fee: $59
• Interest Rate: 19.8% (21.9% for cash advances)
• Credit Limit: Starting at $300
• Application Requirements: Age of majority, no active bankruptcy, no previous Capital One account in bad standing
• Credit Bureau Reporting: Reports to both Equifax and TransUnion
• Special Features: Potential for credit limit increases without additional deposits after demonstrating responsible use

The Capital One Secured Mastercard is widely recognized for helping Canadians rebuild credit. While it does have an annual fee, it offers the potential for credit limit increases without requiring additional deposits after you demonstrate responsible card use.

4. Refresh Secured Visa

• Minimum Deposit: $200
• Annual Fee: $12.95 (plus $3 monthly fee)
• Interest Rate: 17.99%
• Credit Limit: $200-$10,000 (equal to deposit)
• Application Requirements: Age of majority, Canadian residency, security deposit
• Credit Bureau Reporting: Reports to both Equifax and TransUnion
• Special Features: No hard credit check required, instant approval

The Refresh Secured Visa stands out for not requiring a hard credit check, making it accessible for those with severely damaged credit. The instant approval process means you can start rebuilding credit right away, though the monthly fee (in addition to the annual fee) is something to consider.

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Unsecured credit card & alternative credit-building options for poor credit

While secured cards are typically the go-to option for individuals with bad credit, there are also some unsecured options available for those with borderline or improving credit scores.

Getting approved for an unsecured credit card with bad credit is challenging but not impossible. Your chances improve if:

• Your credit score is on the higher end of the "bad credit" range (closer to 560)
• You have a stable income
• You have a long-standing relationship with a bank
• You've recently shown improvement in your credit habits

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Unsecured credit cards: Scotiabank Value Visa

• Annual Fee: $29
• Interest Rate: 13.99%
• Minimum Credit Limit: $500
• Application Requirements: Credit score in the fair range (560+), likely minimum annual income of $12,000
• Credit Bureau Reporting: Reports to both Equifax and TransUnion
• Special Features: Lower interest rate than most cards for rebuilding credit

The Scotiabank Value Visa is designed for those with fair credit who want a lower interest rate. While it's not marketed explicitly for bad credit, those on the borderline between poor and fair credit might qualify, especially if they have a relationship with Scotiabank.

If traditional secured or unsecured credit cards aren't the right fit for you, consider these alternatives that can also help rebuild your credit.

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Prepaid cards with credit-building features: KOHO Prepaid Mastercard

• Annual Fee: $0 (basic version) or $10/month for credit-building feature
• Interest Rate: N/A (prepaid card)
• Credit Limit: N/A (uses your deposited funds)
• Application Requirements: Age of majority, Canadian residency
• Credit Bureau Reporting: Only reports with the premium version ($10/month)
• Special Features: 0.5% cashback, early paycheck access, interest on your account balance

KOHO offers a unique hybrid between a prepaid card and a credit-building tool. While the basic version functions as a regular prepaid card, the premium version reports your payment history to credit bureaus, helping you build credit even though it's not a traditional credit card.

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Credit builder loans and programs

Credit builder loans are specifically designed to help build or rebuild credit. They work differently from traditional loans:

• You're approved for a loan, but don't receive the funds immediately
• The loan amount is held in a secured account while you make payments
• Your payments are reported to credit bureaus
• After completing all payments, you receive the loan amount

Financial institutions like Refresh Financial and Spring Financial offer credit builder programs specifically designed for Canadians seeking to rebuild their credit.

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How to use credit cards to rebuild your credit score

Simply having a credit card isn't enough—you need to use it strategically to improve your credit score.

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Best practices for credit improvement

Follow these guidelines to maximize the credit-building potential of your card:

• Keep utilization low: Use less than 30% of your available credit limit. For example, if you have a $500 limit, keep your balance below $150. Low utilization demonstrates to lenders that you're not overly reliant on credit.
• Pay on time, every time: Payment history is the most critical factor in your credit score. Set up automatic payments or calendar reminders to ensure you never miss a due date.
• Pay in full when possible: While making minimum payments on time will help your credit, paying your balance in full each month avoids interest charges and demonstrates financial responsibility.
• Avoid cash advances: Cash advances often carry higher interest rates and additional fees. They can signal financial distress to lenders.
• Monitor your credit reports: Check your credit reports regularly to ensure your payments are being reported accurately and to catch any errors.

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Timeline for credit improvement

Rebuilding credit takes time and patience. Here's what you can typically expect:

• 1-3 months: Your new credit account appears on your credit report, but there's minimal impact on your score.
• 3-6 months: With consistent on-time payments and low utilization, you may begin to see minor improvements in your score.
• 6-12 months: Many lenders review your account after 6-7 billing cycles. With responsible use, you qualify for a credit limit increase or, in some cases, an upgrade to an unsecured card.
• 12-24 months: With continued responsible use, you should see more significant improvements in your credit score, potentially moving from "poor" to "fair" credit.
• 24+ months: With sustained good habits, you may reach "good" credit territory and qualify for better financial products.

Remember that negative marks like late payments, collections, or bankruptcies can remain on your credit report for up to 6-7 years. However, their impact diminishes over time, especially as you build positive history.

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Additional ways to rebuild credit

While credit cards are powerful tools for rebuilding credit, combining them with other strategies can accelerate your progress.

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Debt consolidation options

High levels of debt, especially high-interest debt, can make credit rebuilding more challenging. Consolidating your debts can help by:

• Simplifying your payments (one payment instead of many)
• Potentially lowering your interest rates
• Reducing your credit utilization ratio
• Creating a clear path to becoming debt-free

Common debt consolidation options include personal loans, balance transfer credit cards (for those with fair to good credit), and debt management plans offered through credit counseling agencies.

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Using home equity to manage debt

If you're a homeowner with bad credit, you have a powerful option that renters don't: using your home equity to consolidate debt and potentially rebuild credit faster.

Home equity loans allow you to borrow against the equity you've built in your home. Even with bad credit, you may qualify because:

• The loan is secured by your property
• Lenders focus more on your equity than your credit score
• The risk to lenders is lower compared to unsecured loans

By consolidating high-interest debts with a home equity loan, you can:

• Significantly reduce your interest rates
• Lower your monthly payments
• Improve your debt-to-income ratio
• Create a structured repayment plan

This approach can accelerate your credit rebuilding by addressing multiple factors that influence your credit score: payment history, amounts owed, and credit utilization.

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The 3-tier credit rebuilding strategy

Based on your situation and available resources, you can follow one of these three approaches to rebuilding credit:

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Tier 1: Basic rebuilding (for non-homeowners)

This approach combines:

• A secured credit card + prepaid card with credit reporting
• Strict payment scheduling and utilization management
• Credit monitoring and disputing errors

Expected timeline: 18-24 months for significant improvement

This approach works well for renters or those without significant assets but requires disciplined use of credit cards and patience.

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Tier 2: Accelerated rebuilding (for homeowners)

This approach leverages your home equity:

• Home equity debt consolidation to immediately reduce utilization
• Secured credit card for ongoing positive payment history
• Strategic closure of high-interest accounts

Expected timeline: 12-18 months for significant improvement

By using home equity to consolidate debt, homeowners can see faster improvement in their credit scores due to the immediate reduction in credit utilization and the establishment of a structured repayment plan.

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Tier 3: Comprehensive rebuilding (for complex situations)

This approach is for those with severe credit issues:

• Combined approach using home equity, secured cards, and credit builder loans
• Financial counseling for budget restructuring
• Debt settlement where appropriate

Expected timeline: 12-36 months, depending on severity

This comprehensive approach addresses multiple aspects of your financial situation simultaneously, providing the most thorough credit rehabilitation for complex cases.

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Rebuild your credit journey with Lotly

Rebuilding your credit score takes time and consistency, but with the right tools and strategies, it's entirely achievable. A secured credit card is often the first step in this journey, providing a structured way to demonstrate financial responsibility to lenders.

Remember these key takeaways:

• Choose a secured credit card that reports to both major credit bureaus and fits your budget
• Keep your credit utilization below 30% and always pay on time
• Be patient—significant credit improvement typically takes 12-24 months
• If you're a homeowner, explore using home equity to accelerate your credit rebuilding

Whether you're recovering from financial hardship or building credit for the first time, the path to better credit begins with small, consistent steps. By following the strategies outlined in this guide, you'll be well on your way to financial recovery and the opportunities that come with improved creditworthiness.

P.S. — If you're a homeowner looking to fast-track your credit rebuilding journey, consider exploring how home equity solutions can help you consolidate high-interest debt and potentially improve your credit score more quickly than credit cards alone.

Lotly provides personalized home equity solutions specifically for Canadian homeowners seeking rapid credit recovery. Consolidate your debts, reduce your financial stress, and reach your financial goals faster — unique financial situations are welcome.

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Frequently Asked Questions

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How long will it take to rebuild my credit with a secured credit card?

With consistent on-time payments and low credit utilization, you can typically see noticeable improvements in your credit score within 6-12 months. However, reaching "good" credit (660+) usually takes at least 12-24 months of responsible credit use, especially if you have serious negative marks on your report.

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Will a secured credit card automatically convert to an unsecured card?

Some issuers review your account after 6-12 months of responsible use and may offer to convert your secured card to an unsecured one, returning your deposit. However, this isn't guaranteed and varies by issuer. Capital One and Neo are known to consider "graduation" to unsecured cards after a period of responsible use.

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Do secured credit cards have rewards programs?

Most secured credit cards don't offer rewards, but there are exceptions. The Neo Secured Mastercard offers cashback rewards, making it one of the few secured cards in Canada that features a rewards program.

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Can I be denied for a secured credit card?

Yes, though approval rates are much higher than for unsecured cards. Reasons for denial might include:

• Recent bankruptcy that hasn't been discharged
• Fraud alerts on your credit report
• Inability to verify your identity
• Insufficient income to make minimum payments

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How much should I put down as a security deposit?

The minimum required deposit is typically sufficient to help you start rebuilding your credit. However, if you can afford a larger deposit, it can provide a higher credit limit, which makes it easier to maintain a low utilization ratio. A good rule of thumb is to deposit enough to keep your typical monthly spending below 30% of your credit limit.

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Should I close my secured credit card once my credit improves?

It's generally better to keep your account open, as the length of your credit history is a key factor in determining your score. Instead of closing the account, consider:

• Asking the issuer to convert it to an unsecured card
• Keeping it open with minimal use
• Using it for a small recurring bill with autopay

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Can I have multiple secured credit cards?

Yes, having two credit cards can actually be beneficial for your credit score, as it:

• Increases your total available credit
• Provides more opportunity to demonstrate responsible payment behavior
• Creates a more diverse credit mix

However, make sure you can manage multiple payments and annual fees before applying for a second card.