When applying for a credit card, one important factor to consider is your credit score – a numerical value between 300 and 900. This value is calculated based on the individual’s credit history which includes considerations for the number of open accounts, total debt, and payment history. From the lender’s perspective, a borrower’s credit score is the likelihood that the borrower will be able to repay their debt on time.
What Credit Score Do You Need To Get A Credit Card?
There is no ‘magic’ credit score needed to be approved for a credit card. It ultimately depends on the specific card provider and their requirements. In Canada, most card providers view a credit score of 660 as satisfactory but will take into consideration a variety of factors when assessing an application.
One thing to note is that you have more than one credit score. The two main credit bureaus in Canada are Equifax and Transunion, and they both have their own formula to calculate an individual’s credit score.
Where Can You Check Your Credit?
Due to new regulations, you can check your credit report for free with both credit bureaus. Equifax makes both your credit report and Equifax credit score available to you online, while you can get your consumer disclosure report online each month for free with TransUnion. Credit card providers tend to pull one or the other, so you can research which credit bureau they pull from to know whether you are likely to qualify.
Check Your Credit With A Third-Party Provider
|Cost||Credit Score||Credit Report|
How Your Credit Scores Affect Your Ability To Get A Credit Card
While your credit scores do play a role in your ability to get approved for a credit card, a variety of other information is also used. This includes all information collected from your credit application. For example, income, employment, banking relationships, and how long you’ve lived at your residence.
Below is a table displaying your likelihood of getting approved for new credit based on each credit score range:
How To Build Your Credit In Canada?
There are many different ways to build your credit scores. All credit scores react differently and there is no single action that will help build better credit.
But generally, there are five main factors that impact your credit:
- Payment History – This factor accounts for around 35% of your credit score calculations. As such, making full on-time payments can help build your credit.
- Debt-To-Credit Ratio – Your debt-to-credit ratio is another factor that may affect your credit scores. It refers to the amount of credit you’ve used versus how much you have available. For example, a balance of $5,000 on a credit card with a $10,000 limit would equate to a credit utilization rate of 50% for that account. Typically, it is advised that consumers use less than 30% of their total available credit.
- Credit History – The age of all your accounts can also impact your credit scores. Having old accounts in good standing can help build your credit.
- Credit Inquiries – In general, it’s recommended that you don’t apply for too many credit products within a short period of time. Too many hard inquiries can hurt your credit and signal financial difficulties to future lenders.
- Public Records – If you’ve filed for bankruptcy or a consumer proposal, they’ll show up under public records on your credit report. This can affect your ability to get a credit card.
Factors That Affect Your Ability To Get A Credit Card
Credit card issuers will also look at other factors besides your credit scores when reviewing your application.
One factor that your credit card issuer will consider is your income. They will want to know if it is a steady source of income and sufficient enough to pay back your debt. Usually, credit card providers prefer to offer credit to those who are employed full-time. Students, retirees, part-time workers and self-employed workers may find that they are eligible for lower credit amounts and have limited options in regard to which credit card they qualify for.
Your debt-to-credit ratio refers to the amount of revolving credit you have versus how much you’ve used. Credit card providers will usually consider how you have utilized previous credit accounts. Generally, lenders like to see debt-to-credit ratios around 30%, higher ratio can be a sign of overuse or inability to properly manage debt.
As such, even if you have good credit, it is still possible for your credit card application to be denied if you have too much existing debt or limited credit history.
Credit history includes detailed reports of whether previous debts have been paid in full and on time, and whether the debtor tends to keep a balance on their credit cards. Many credit card issuers will consider an applicant’s credit history to understand their long-term credit tendencies and whether they are likely to repay the debt they owe.
Best Credit Cards For Your Credit Score
|Credit Card||Interest||Annual Fee||Credit Score Required|
|Best BMO Cash Back Credit Card||19.99%||$0||Fair to good|
|WestJet RBC World Elite Mastercard||19.99%||$119||Good to excellent|
|Koho Prepaid Visa Card||N/A||$0||No credit checks|
|Capital One Venture||17.24% – 24.49%||$95||Very good to excellent|
What Kind Of Credit Card Can I Get If I Have Bad Credit Or No Credit?
Those with a credit score below 650 could potentially find it difficult to be approved for premium credit cards. However, there are a few different types of credit cards that you can still qualify for if you can’t meet the approval requirements.
Retail Credit Cards
One option is to apply for a retail credit card. A retail credit card is an offering created when retailers partner up with banks or banking networks to provide a credit service. Typically, retailers have less stringent requirements and may not even require a credit check.
A retail credit card usually offers special discounts and loyalty rewards programs for their store, as long as you keep your account in good standing. However, many retail credit cards come with higher interest rates, which can increase your interest expense if you don’t pay off your account balance each month.
Prepaid Credit Cards
Prepaid credit cards are another alternative for those with low credit scores. These cards require the cardholder to top them up with cash before any purchases can be made. After funds have been added to the card, it can be used just like any other credit card. While most prepaid cards don’t have a rewards program, there are some providers that do offer cash back rewards and other perks like a credit card.
However, it’s important to note, prepaid credit cards will not help you build your credit as it is not a credit product and payments are not reported to the credit bureaus.
Student Credit Cards
Students may want to consider applying for a student credit card. These cards are designed for full-time students and have less stringent qualifications and requirements. Student credit card typically has no annual fees and a decent rewards system. However, they tend to come with lower credit limits which can lead to high debt-to-credit ratios. But it can also help students build their payment history while they are still in school, which may positively affect their credit scores.
Secured Credit Cards
Those with poor or limited credit history can also consider secured credit cards. A secured credit card will require the cardholder to provide a deposit which becomes the account’s credit limit. If the cardholder fails to make payments, the lender will simply use the deposit to pay off the balance.
Most secured cards don’t offer any rewards system, but the payments you make may help build credit.
Does Switching Credit Cards Affect Your Credit Scores?
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Credit Card FAQs
Can I get a credit card If I have poor credit?
Yes, you can still get a credit card with poor credit, however, it depends on the credit card you’re applying for. Generally, retail credit cards have low requirements and may not even require a credit check. You can also opt for a secured credit card, which pretty much guarantees approval so long as you can provide the minimum security deposit.
Can I get a credit card if I’m unemployed?
Not all credit card issuers will require you to be employed. However, they generally will have an income requirement. If your income source comes from government benefits or investments, they may approve you. However, approval is never guaranteed.
Do I need a credit check if I apply for a credit card?
Most credit card companies will perform a credit check when you apply for a credit card. This may slightly bring down your credit, however, the effects are usually very temporary.
While credit scores play a part in the credit card application process, it is not the only deciding factor. There are many different types of credit cards that suit individuals with varying financial situations. As always, it is important to do some due diligence to figure out what options work best for you, and to spend within your means even when approved for credit.
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