How to Get Your First Credit Card in Canada

If you ever want to take out a loan, purchase insurance, or rent an apartment, you’ll need to establish and grow your credit. But how do you establish credit when you’ve never had credit before?

People with no credit tend to be young people and newcomers to Canada. Without a credit history, you might struggle to qualify for credit cards with the lowest interest rate or the best rewards, but this will come if you learn to manage your first credit card responsibility. You can also start your credit journey by using credit card options designed for newcomers to Canada and students looking to build their credit.

Find Out Your Credit Score Before You Apply

Your credit score is a three-digit number ranging from 300 to 900. This number illustrates how well you manage your credit. A lower score indicates a higher level of risk that you won’t pay your bill on time. Lenders look at your credit score to decide if they want to lend you money and to determine what interest rate they will offer you. 

Many lenders list the minimum credit score needed to qualify for a credit card online. Before applying, you can check your credit score to see if you meet the minimum criteria. If you don’t, you can look for another credit card or work on improving your score. 

You can check your credit score for free by signing up for Borrowell.

Option 1: Apply for a Secured Credit Card

A secured credit card is like a regular credit card with one big exception. Before you can use the card, you have to put down a deposit. 

For instance, you put down a $500 cash deposit so you can get a secured credit card with a limit of $500. 

Secured credit cards are typically easier to qualify for compared to regular cards because they’re backed by a deposit. This makes secured credit cards a great option for newcomers to Canada and young people who want to build their credit. 

Just like a regular credit card, you can use your secured card to make purchases. By paying your card on time, you can build your credit score. However, if you don’t make your payments, your creditor can use your cash deposit to pay your bill. 

Option 2: Find a Card Specifically for Newcomers to Canada

Many Canadian banks offer specialized packages and credit cards for newcomers to Canada. Newcomer packages often include a fee-free checking account, specialized mortgage offerings, and credit cards that don’t require a credit history.   

Credit cards for newcomers to Canada are designed to help establish and grow credit history. There are both secured and unsecured cards available. To minimize risk to the lender, newcomer credit cards often have minimum annual income requirements to qualify.  

Option 3: Get a Student Credit Card

If you’re a student enrolled in a Canadian college or university, you’re likely to qualify for a student credit card. 

Student credit cards often come with lower credit limits and are designed for post-secondary students just starting to build credit. It’s generally easier to get approved for a student credit card than a standard credit card, and many don’t require a credit score to apply.

Factors to Consider When Choosing Your First Credit Card

When it comes to how to choose your first credit card, there are some important factors to consider, including: 

Interest rates

Your interest rate becomes very important if you ever have to carry a balance on your credit card. The higher your interest rate, the more money you’ll pay to carry forward your balance. 

There’s also an interest rate attached to any cash advances or balance transfers you make with your credit card. Proceed with caution if you come across credit cards marketed to people with bad credit, as these often have very high fees.

Qualification criteria

In addition to any credit score requirements, you can check to see what other criteria you need to meet to qualify. Generally, to get a credit card in Canada, you need to be a permanent resident and of legal age in your province. 

Annual fees

Some credit cards charge an annual fee which is a lump sum amount that’s added to your credit card statement once a year to pay for your credit card. 

Many credit cards that charge an annual fee offer special benefits or other rewards, such as insurance coverage. Sometimes paying an annual fee can help you secure a lower interest rate. 

How to Apply for Your First Credit Card

To apply for your first credit card, follow these steps: 

• Check your credit score. You should know what credit score you’re working with before you start researching credit cards. This will help to inform what you can get. 

• Compare credit cards. Research various credit cards to see which ones you’re most interested in and which ones you qualify for based on your credit score and other criteria. 

• Review the terms. Compare cards based on features like interest rate, annual fees, and rewards. 

• Submit an application. Most applications require a mix of personal and financial information, including your name, address, social insurance number, date of birth, income, and employment status. 

• Wait for a decision. If you apply online, you should get your decision within a few seconds. Then, you’ll have to wait to receive your physical card in the mail. This typically takes between five and 10 business days.

What if my Application for my First Credit Card got Declined? 

If you don’t get approved for a credit card, don’t worry! There are other ways you can build your credit score so you’re more likely to get approved in the future. 

Report your rent

If you rent, you can get credit for paying your bills on time through Rent Advantage. It’s easy to sign up, and all of your rent payments are reported to Equifax Canada to help you build your credit history. You can cancel anytime, and you don’t need your landlord's approval to get started.  

Become an authorized user

Ask a family member or friend to become an authorized user on their credit card. Becoming an authorized user allows you to make purchases with the primary user's credit card without being responsible for the payments.  

If the credit card provider reports authorized users to the credit bureau, you can use this strategy to help establish or build your score. While becoming an authorized user won’t contribute to your payment history (since you aren’t paying the bills), it does contribute to your credit history. 

Before asking someone to add you as an authorized user, make sure they have responsible credit card habits. If you choose someone with a low credit score and bad habits, this could negatively affect your score.

Use a credit builder program

Credit builder programs, such as Borrowell’s Credit Builder, provide a safe way to build credit. You make monthly automated payments using pre-authorized debit, which go into a savings account. You do this for 36 months.  

During this time, all of your payments, including any missed payments, are reported to Equifax Canada. On-time payments can help build your credit score. There’s no hard credit check and it’s available to all qualified Borrowell members.  

Check your credit score regularly

To ensure your credit score is moving in the right direction, it’s a good idea to monitor it regularly. With Borrowell, you can download your Equifax credit report for free and check your credit at any time without hurting your score.   

How to Use Your First Credit Card Responsibly

A good credit score can help you access a lower interest rate and better terms on everything from a personal loan to insurance and a mortgage. To practice responsible credit card use and work on building your credit, consider the following tips: 

Pay your bills on-time

Your payment history (whether you pay your bills on time) accounts for the largest portion of your credit score (35%). Paying your bills on time every month is the best way to build your credit score. To ensure you don’t miss a payment, consider setting up auto-payments to take the money out of your bank and pay your credit card on schedule. 

Aim to pay in full

Ideally, you want to pay your credit card bill in full each month to avoid interest payments. If this isn’t possible, make sure you pay your minimum to avoid lowering your credit score.  

Keep credit utilization low

Credit utilization represents how much of your available credit is in use. The lower your credit utilization, the better. High credit utilization can act as a red flag to lenders, signalling that you might struggle to pay off your balance.

For instance, if you have $1,000 in available credit, and you’re using $950, this is an extremely high utilization. To help keep your balance low, try making multiple payments each month, instead of waiting until the end of the month when money is tight. 

The Bottom Line

If you’re a recent graduate or a newcomer to Canada and you’re wondering how to get a credit card for the first time, you can use this article as your guide. There are secured cards and other credit card options designed for newcomers to Canada and post-secondary students. These cards are generally easier to qualify for than a standard unsecured credit card. 

If your application for your first credit card isn’t approved, don’t give up. There are alternative ways to establish your credit, including rental reporting and becoming an authorized user. To ensure your credit score is always trending in the right direction, you can sign up with Borrowell to check your credit for free whenever you want, without hurting your score.