Best Credit Building Credit Cards In Canada For January 2025

When determining a rating for individual credit cards, the Forbes Advisor Canada editorial team factors in an exhaustive list of data points. With credit building , the scoring model used takes into account factors such as, but not limited to, reward earn rates and categories if there are any, fees and other features. Keep in mind, what may be best for some people might not be right for you. Conduct informed research before deciding which cards will best help you achieve your financial goals.

KOHO Essential Prepaid Mastercard

With no APR score and a low annual fee, this is one of the cheapest possible prepaid cards you could own—but it will cost you $10 a month to build your credit score.

Rewards: 1% cash back groceries, bills and services and up to 5% cash back at KOHO retail partners.

Welcome Offer: Earn a $20 cash bonus when you sign up for a KOHO account with code (PLEASE INCLUDE RELEVANT CODE) and make your first $20 purchase within 30 days of registration.

Annual Fee: $4 per month or $48 per year with an Essential Plan

Other Benefits and Drawbacks: This prepaid credit card can help you build credit and offers substantial cash back with no limits. Unfortunately, it also doesn’t offer very much by way of other perks, aside from a reduced FX fee.

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KOHO Extra Mastercard® Prepaid Card

This credit card’s rewards program for groceries, eating and drinking and bills and services equals those of cards with much stricter requirements.

Rewards: 1.5% cash back on groceries, eating and drinking and bills and services, with 0.25% cash back on all other purchases.

Welcome Offer: Earn a $20 cash bonus when you sign up for a KOHO account with code (PLEASE INCLUDE RELEVANT CODE) and make your first $20 purchase within 30 days of registration.

Annual Fee: $108 ($9 a month)

Other Benefits and Drawbacks: This card earns quite a bit of cash back and has no FX fee. You also earn 3% interest each month on your prepaid balance. Plus, it can help you boost your credit for an additional $7 per month with either a line of credit, a secured line of credit by invite only or both. That said, the $84 annual fee is a bit high. KOHO Cover, an interest-free, no application overdraft protection that doesn’t impact your credit score is also available, but it comes as an additional fee.

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Neo Secured Mastercard®

If you’re looking for a secured credit card that can still earn you rewards on everyday spending, this is the card for you.

Rewards: Earn up to 4% cashback on gas and grocery and up to 1% everywhere else

Welcome Offer: Up to 15% cashback on first-time purchases

Annual Fee: $5 per month

Other Benefits and Drawbacks: Unfortunately, the 4% amount you can earn on this card is limited to gas and groceries, but you are guaranteed a solid 1% back on all your other spending. Because it’s a secured card, it can help you improve your credit too.

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Home Trust Secured Visa Credit Card

This card has the lowest APR on this list.

Rewards: None.

Welcome Offer: $0

Annual Fee: $59

Other Benefits and Drawbacks: This card requires a minimum deposit of $500 or more if you need a larger line of credit.

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Home Trust Secured Visa Credit Card (No-Annual-Fee Option)

This card comes without the annual fee of the standard Home Trust Secured Visa.

Rewards: None

Welcome Offer: $0

Annual Fee: $0

Other Benefits and Drawbacks: This card doesn’t have a rewards program, nor does it come with the travel and consumer related perks of the Home Trust Secured Visa Credit Card.

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ATB Alberta Mastercard Secured

This secured credit card can help build credit, but it’s only available to Alberta residents.

Rewards: None

Welcome Offer: None

Annual Fee: $49

Other Benefits and Drawbacks: Cardholders can save 25% on car rentals with participating Avis and Budget businesses and the ability to build their credit. However, it is only available to residents of Alberta and does have a small annual fee.

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Capital One Guaranteed Mastercard®

This card is as easy to apply for as a secured credit card without the security deposit.

Rewards: None

Welcome Offer: None

Annual Fee: $0

Other Benefits and Drawbacks: This card offers some traveler and consumer protections, including baggage delay and car rental loss or damage waivers.

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Capital One Guaranteed Secured Mastercard

If you need to apply for a secured credit card because of bad or nonexistent credit, this one has the lowest deposit on our list.

Rewards: None

Welcome Offer: None

Annual Fee: $0

Other Benefits and Drawbacks: This card has secondary insurance, purchase protection, travel accident insurance and other travel and consumer-related protections.

Data research and analysis by Debra Toews and Tia Duncombe.

A credit score is a number between 300 and 800 that represents the risk you present to lenders. The lower your score, the higher your risk. Your credit score is calculated based on the information in your credit reports, including:

• Your payment history.
• Your credit utilization (how much credit you have vs. how much you use).
• Length of your credit history.
• How many credit inquiries you’ve made.

There are several factors that affect your credit score including:

• Do you make your payments on time? Missed or late payments can hurt your score.
• How much debt do you have outstanding (or how much do you owe) and how much credit have you used? If all your credit cards are maxed out, it could signal you have too much debt or not enough income.
• Do you have several different kinds of debt, i.e. credit cards, line of credit, car loan, etc. Having a well-managed diverse debt portfolio shows that you can hold a wide range of debt responsibly.
• Have you made several credit inquiries in a short period of time? Multiple loan applications may temporarily hurt your score, especially if you have a short credit history.
• How old are your credit accounts? The age of your oldest and youngest credit accounts, as well as the average age, can have an impact on your credit score.

Credit building means you’re trying to earn a higher credit score and improve your chances of qualifying for credit cards, car loans, mortgages and lines of credit.

• No Credit – If you have no credit, you’ll need to build credit to qualify for some basic loans. You may have no credit if you’re new to Canada, a young adult or simply have never had a credit card or loan in your name.
• Bad Credit – You may have bad credit if you’ve been unreliable in your payment history in the past. For example, if you’ve missed a bill or credit card payments.
• Fair Credit – You may have fair credit if you have some positive credit history as well as some mistakes like missing payments and high credit utilization.

Why Is Building Credit Important?

A good credit score is essentially your track record that lets lenders know how reliable you are. A good credit score means you have a record of being responsible with credit, and it’s necessary for making important financial moves, like securing a mortgage, car loan or line of credit.

Quick and Easy Ways to Increase Your Credit Score

Check your credit score often 

You can check your credit score for free throughout the year through the two major credit agencies: Equifax and TransUnion. This is also important to make sure no fraudulent activity is being made under your name.

Make your payments on time 

Making your bill and loan payments is a key part of earning and maintaining a good credit score. Even making the minimum payment on your credit card bills counts toward this.

Pay down your debt

Paying off debt positively impacts your credit score. It also contributes to your credit utilization.

Clear up the public record

If you have a public record shown in error on your credit report, you can dispute it and have it removed by reaching out to the credit bureau. This is also why checking your credit report regularly is important.

Keep your credit accounts open

Even if you pay off a credit card or loan, keeping it open can improve your credit score for two reasons. Firstly, it can positively affect your credit utilization. Secondly, it can lengthen your credit history.

Stop applying for new accounts

If you often make an attempt to open new credit accounts, this can negatively affect your credit score. Try to only apply for the accounts you need and pay them off on time.

Paying your balance on time and in full is always the best way to rebuild credit with a credit card and improve your credit score. Leaving a bill unpaid, or missing several bills in a row, is an easy way to lose points. A credit score is all about showing you can consistently pay your debts. Prove that you can do that for an extended period of time, and your score will inevitably rise.

If you think your credit score is just a number, think again: Building credit directly impacts many aspects of your life, including your odds of being approved for financial products, qualifying for lower interest rates and credit cards with better benefits.

According to the Financial Consumer Agency of Canada, not only does negative information, such as late or missed payments, accounts that have been sent to collection agencies and bankruptcies, hurt your credit score, but these financial lapses can stay on your record for a while. For example:

• Negative information about credit cards and loans may stay up to six years
• Credit checks by lenders depends on the credit bureau; Equifax keeps this information for three years, TransUnion keeps it for six years
• Bankruptcy stays on your report for six or seven years

All credit cards build credit, but some do it exceptionally well. Here are the best credit cards you can get to build your credit and raise your credit score.

Prepaid Cards

Prepaid credit cards typically don’t allow you to build credit. However, the cards on this list have specific features that allow you to do this.

Secured Credit Cards

Secured credit cards function just like a conventional credit, except they require security funds. The security funds are equal to your available balance on the card. These cards can be a good way to earn credit history and can usually result in being upgraded to a conventional credit card.

Unsecured credit cards

Unsecured credit cards can help you build credit, but can be difficult to qualify for. That said, there are a number of cards specifically designed for people with bad credit. Using these responsibly and making payments on time can help build your credit score.

If you are new to Canada, unfortunately you can’t take your credit score with you from your home country. The best way to establish a credit history in Canada is to start using a credit card responsibility. While it can be challenging to qualify for a credit card without an adequate history, we’ve evaluated the top credit card choices for newcomers here: Best Credit Cards for Newcomers To Canada for April 2024

When looking for a credit card to help you build credit, there are a few things you’ll need to consider:

 Credit Bureau Reporting 

Make sure the card reports to a credit bureau. For instance, some secured cards do not impact your credit score whatsoever.

 Annual Fee

A card with a low annual fee or no annual fee can help you build your credit score without incurring unnecessary costs.

 APR

If you’ve struggled with responsibly using a credit card, look for one with a low interest rate. This can help you avoid paying unnecessary fees and pay down your principal balance faster.

Loyalty Points or Rewards

Even cards meant to help you build credit can still come with benefits, like cash back or rewards. 

Minimum Repayment

Pay attention to the minimum payment on your card’s statement. This lets you know the payment that’s required of you for each statement to maintain and good credit standing. That said, it’s always best to pay your cards off in full to avoid interest charges and further improve your credit score.

Free Credit Score Option

Some financial institutions offer credit score services, and allow you to keep track of your credit score online or via their banking app. This can help you to track your progress in meeting your goal.