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These days, having a credit card may be essential for many things. Want to rent a car? You'll need a credit card for that. Staying at a hotel? The first thing they'll ask for is your credit card to cover incidentals.
At times, not having a credit card can make life extremely inconvenient. But if you're just out of university, a newcomer to Canada or have poor credit, you might worry about whether you'll be able to qualify for a credit card.
One important factor in getting approved for a credit card is your credit score — the three-digit number tied to your credit history in Canada. Credit card issuers in Canada look at your credit score to determine your creditworthiness — but exactly how high do they want it?
We'll walk you through the ins and outs of credit scores and credit cards to help you understand what you'll need to qualify.
Key takeaways:
Technically, there's no universal minimum credit score requirement needed to get a new credit card. Credit card issuers set their own minimums — and some will issue you a card without a credit score at all. For example, Scotia has special programs in place for new permanent residents, international students, temporary foreign workers, and domestic students without a credit score in Canada, like the Scotiabank® Scene®1 Visa* credit card.
What is a good credit score in Canada?
Credit scores in Canada fall into five categories and range from 300 (poor) to 900 (excellent).3 Generally, in Canada, a credit score of 660 is considered good, and could help you get approved for a credit card. However, that may differ by credit card issuer and by the card you are applying for.
Something to keep in mind though, is that having a credit score of at least 660 doesn't necessarily mean you'll qualify for any credit card you apply for. Premium cards with attractive perks, or lower interest rates, could require higher credit scores to qualify.
However, that would really depend on the credit card issuer, as qualifying criteria will be different. If you’re looking for a low interest credit card to build your credit score, you could take a look at what the Scotiabank Value® Visa* Card has to offer.
Where can you see your credit score?
Depending on what you’re using to check your credit score (a financial institution or an app) and which credit bureau is providing the score, you’ll usually be given a credit score range from poor to excellent.
Scotiabank customers can check their credit score on the Scotiabank app or online. It’s also important to remember that your credit score changes over time, and if it’s not where you want it to be right now, there are ways to improve it.
Should you apply for a credit card if you don't meet the minimum credit score?
So the million-dollar question is, should you still apply for a credit card even though you don’t meet the credit score requirements the credit issuer may be asking for?
While credit card issuers take into account other factors, which are listed below, they almost never make exceptions about the credit score, if they list one for a particular card. This is not a common practice, however.
Applying for new credit, including a new credit card, might affect your credit score because a hard credit check is needed, and many inquiries (in case you apply and don’t get approved, and apply for another card) might pull your credit score down. That’s why it’s important to evaluate your options and apply for a credit card you are more likely to qualify for.
If you're looking to rebuild your credit score or are building it from scratch, there are a few types of credit cards that you may be able to qualify for:
• Secured credit cards
If you want to build or improve your credit history, for example if you're new to Canada or have bad credit, you could consider a secured credit card. With a secured card, you’d need to deposit a security amount equal to your credit limit plus a percentage determined by the financial institution. Although you can't use the deposit to pay your balance, you'll get it back when you close your account in good standing or if the lender approves the release of the security.
Making timely payments will gradually boost your credit score, eventually opening doors to unsecured cards or other credit options. While secured cards may lack extra benefits, they prioritize credit building over perks like travel rewards. If you’re new to Canada, take a look at credit card options offered by the Scotiabank StartRight Program.
• Credit builder credit cards
Some credit cards could help you build your credit score, there are the next step up from secured credit cards. They typically don't offer opportunities to earn rewards or have cashback options. They also tend to come with a lower credit limit. As with other credit cards, a credit builder credit card, could help you with starting a good track record of repayment to boost your credit score. Some credit card issuers offer sign-up perks, like no interest for a limited time after opening the account. If you’re considering a lower interest credit card, take a look at our Scotiabank Value® Visa* Card.
• Store and affiliated credit cards
Store and affiliate credit cards are credit cards that are affiliated with another organization, such as a department store or an alumni association or a third party’s rewards program
An example of this type of card is the Scotiabank Scene+ Visa Card – which is affiliated with the Scene+ rewards programs.
These cards can also have additional benefits. The Scotiabank Scene+ Visa credit card, for example, has no annual fee, and you can earn and redeem points on all purchases with the ability to earn more points at all eligible partner stores.
• Credit cards for students
Credit card issuers often design credit cards specifically for people who might have a lower credit score. There are lots of options for credit cards for students studying at a post-secondary institution in Canada.
While this group often doesn't have a credit score, credit card issuers want to help students get their first credit cards to start building their credit history. If you're in college or university, you could consider applying for credit before you graduate as it's harder after you do if you have no credit history. For example, the Scotiabank® Scene+™ Visa* Card could be a good fit for students building out their credit scores.
• Credit cards for newcomers
Another group that credit card companies often make a credit score exception for is newcomers. Since your credit score doesn't follow you to another country, all new arrivals in Canada start with no credit score — regardless of how great their credit score might have been in their original country. Scotiabank's StartRight Program has resources for newcomers, including information on credit card products available.
It can be easier to get a credit card for a newcomer, and start building credit in Canada, if they have a job lined up. If you're moving to Canada, there are a few things you can prepare ahead of time to set you up for success in a new country.
Credit cards can be a great way to build credit. Because you have to make payments every month, you can quickly create a track record of on-time payments. That may help you start building or improving your credit history.
Here are some other suggestions for building and improving your credit score:
Make payments on time
Making your payments on time is a key part of improving your credit score — and this applies to all of the bills you pay (including your cellphone, and other bills), but especially those that report payments to a credit bureau.
By maintaining a track record of on-time payments, you'll boost your score over time. In contrast, those missed payments can have a negative impact on your score.
Reduce your credit utilization ratio
One of the factors that determines your credit score is how much of your available credit you're using. If you have other credit card debt or lines of credit, make sure to use less than 30%1 of the available credit on them.
Become an additional cardholder
If you have a family member or friend who has a credit card with a long payment history and consistent payments, you may be able to boost your credit score by being added as a co-borrower to their account. You don't need to use it — as soon as they add you as a secondary cardholder, their credit history for that credit card will be added to your credit report. This could help you boost your credit score.
Keep older accounts open
This definitely sounds counterintuitive, but if you have an old credit account that you're no longer using, it's usually better not to close the account, because the length of your credit history is one of the factors that affect your credit score.
One other thing to remember here is that financial institutions may close an inactive account after a certain time, so keeping a record of all your opened accounts is good practice.
Don't make a lot of credit applications
Each time you apply for credit with a lender, that lender will do a credit check, which will show up on your credit report. If you do need to make a lot of credit applications, try to do them within a short time period (within a two-week period to be more precise), as they will be considered one inquiry rather than multiple ones.2
Aim for a credit mix
Having a healthy mix of credit products, such as a credit card, personal loan, and line of credit, on your credit file may also improve your credit score.
However, opening accounts you don’t need just to have a credit mix is not a good practice. Always evaluate your options, and only open credit accounts you need based on your personal financial situation.
A good credit score is just one factor that is considered when approving you for credit, and there are other factors a credit card issuer may be looking at when considering your application. Again, though, that all depends on the lender and the credit card you choose to apply for.
Some credit card application factors lenders may look at:
- your history of payment
- the total amount you owe
- how much of your credit you're using
- how long you've had your credit
- whether you've been applying for new credit
- the types of credit products you have
The length of your credit history may give you a higher credit score. How long you've been using credit is one of the key factors in calculating your credit score although there's no independent credit length requirement to qualify for a credit card.
However, if you don’t have a credit history, there is a number of credit card options in Canada designed for those who have no credit, like cards offered through Scotia's StartRight Program, so a lack of credit history may not necessarily stop you from getting a credit card. But it could make qualifying for premium cards or higher credit limits harder.
Takeaways
Having a credit card can be a good way to help build your credit and having one makes many purchases more convenient. However, with credit building, nothing happens overnight. You can't make your credit score skyrocket in a matter of months — you need to remain consistent over time to see a difference. Credit building takes patience, but it's well worth it.
This article is provided for information purposes only. It is not to be relied upon as financial, tax or investment advice or guarantees about the future, nor should it be considered a recommendation to buy or sell. Information contained in this article, including information relating to interest rates, market conditions, tax rules, and other investment factors are subject to change without notice and The Bank of Nova Scotia is not responsible to update this information. References to any third-party product or service, opinion or statement, or the use of any trade, firm or corporation name does not constitute endorsement, recommendation, or approval by The Bank of Nova Scotia of any of the products, services or opinions of the third party. All third-party sources are believed to be accurate and reliable as of the date of publication and The Bank of Nova Scotia does not guarantee its accuracy or reliability. Readers should consult their own professional advisor for specific financial, investment and/or tax advice tailored to their needs to ensure that individual circumstances are considered properly and action is taken based on the latest available information.
3 https://publications.gc.ca/collections/collection_2016/acfc-fcac/FC5-8-25-2016-eng.pdf
