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If you have bad credit, you’re not alone. Plenty of consumers across Canada suffer from poor credit that is hindering their financial freedom. But while bad credit can definitely put a damper on your ability to get approved for new credit, it doesn’t mean you’re stuck with it forever.  

No matter what position you’re in, there are ways to improve your credit scores, including a variety of credit-building programs. 

Credit Building Programs In Canada

If you have a bad credit score, there are programs available that can help you rebuild your credit:

KOHO Credit Building Programs

KOHO is a fintech company in Canada that offers two Credit Building Programs to help Canadians build healthy credit histories. Users can also choose to activate both options to supercharge their credit building efforts.

What Is The KOHO Credit Building Program?

KOHO’s Credit Building Program has a $10 monthly fee and users can stay opted in for as many months as they need. KOHO recommends at least 3 months for best results. KOHO will open a line of credit in your name and you’ll make monthly payments toward your line of credit. All your payments will be reported to one of the major credit bureaus in Canada.

What Is The KOHO Flexible Credit Building Program?

KOHO users can activate KOHO’s Flexible Credit Building from their KOHO app. This option is a secured line of credit and users must set aside $30 to $500 in their account to act as security. Once the line of credit is activated, you can use it to make purchases and then repay what you owe at the end of the month. These payments are reported to a credit bureau and can help build a healthy credit history. With this option, you’ll also need to cover a $5 monthly service fee.

How To Apply For KOHO’s Credit Building Programs? 

To be able to subscribe to either of KOHO’s Credit Building Programs, you’ll need to:

  • Open A KOHO Account – You’ll need to first sign up for the KOHO spendable account. The KOHO spendable account is a free prepaid Mastercard that can be used to make purchases while earning cash back. You are required to open this account as it will be used to automatically withdraw your monthly subscription fee or your monthly payment for your secured line of credit.
  • Fund Your Account – Be sure to fund your account with enough money to cover your subscription fee or service fee and monthly payment.

Credit Building Savings Loan

If you’re looking to borrow money while improving your credit scores at the same time, you might find yourself getting rejected for different loan products. In this case, a credit building savings program may prove to be helpful. These programs are designed to help consumers build or improve credit and are ideal for those who’ve experienced past financial hardships that have led to poor credit scores.

What Is A Credit Building Savings Loan?

A credit building savings loan (sometimes referred to as a credit building program) allows you to make low weekly payments to the program provider. The provider will report all your payments to the major credit bureau(s). As you continue to make timely payments, you’ll build a positive payment history which can help improve your credit scores. 

It’s important to remember a credit building savings loan is not an actual loan. Rather you make payments to the provider for a certain number of months. Each payment is stored in a trust and is given back to you at the end of the program, minus any interest and fees. Through the program, you’ll be able to build credit and save money. 

Credit Building Savings Loan Programs

Spring FinancialLearn More
Refresh FinancialLearn More

Secured Credit Card

It can be tough to get approved for a traditional credit card with bad credit. Secured credit cards, on the other hand,  are much easier to secure because all you need to do is provide the minimum security deposit, which can start as low as $50. So long as you can provide the security deposit, you’re pretty much-guaranteed approval. 

How Does A Secured Credit Card Work?

Secured credit cards work just like regular credit cards, except you’ll need to provide a sum of money as security. Often, although not always, your security and credit limit will be the same amount.

As you make payments, the lender will report them to one or both of the credit bureaus. This, in turn, will help you build a positive payment history which can positively impact your credit scores. The main drawback to secured credit cards is their lack of perks. Unlike a regular credit card, there’s usually no point system or added perks like travel insurance.

Best Secured Credit Cards

Annual FeeInterest RatesMin. Deposit
Neo Secured Credit$0- 19.99% - 26.99%
- QC: 19.99%-24.99%
Capital One® Guaranteed Secured Mastercard®$5919.8%$75 or $300
Home Trust Secured Visa Card0$ or $59- 19.99% (no annual fee)
- 14.90% (with annual fee)
Vancity enviro™ Secured Visa* card$0 - $39511.25% or 19.50 %$500
TD Cash Secured Credit Card$2927.74% variable APR$300

Credit Counselling

Credit counselling is a service offered by both for-profit and non-profit companies to help individuals get back on track with their finances. These programs offer debt relief solutions through education, budgeting, and guidance. They also offer ways to ultimately reduce and even eliminate debt altogether.

How Does Credit Counselling Work?

Credit counsellors generally work by reviewing your overall finances. They will evaluate your income, debt, and savings goals to create a budget for you. However, sometimes more extreme measures are required. In certain cases, credit counsellors may recommend a debt management program or that you speak to a Licensed Insolvency Trustee to discuss a consumer proposal or even bankruptcy. 

Credit Counselling Companies

Consolidated Credit Learn More
Full CircleLearn More
BDO First CallLearn More

Credit Repair 

Companies associated with credit repair work by obtaining your credit report and communicating with creditors on your behalf to get rid of any black marks on your report as soon as possible. However, it’s important to note that only negative remarks that are actual errors can be removed. The removal of such negative notes can have a positive impact on your credit scores.

Should I Work With a Credit Repair Company?

Credit repair companies can help build your credit, but they cannot do anything you can’t do on your own. They simply help you read your report and file disputes on your behalf for a fee. 

How Do Credit Scores Work? 

Credit scores range from 300 to 900, with scores closer to 300 being poor and scores closer to 900 being excellent. Credit scores are used by lenders to evaluate the likelihood that you’ll make your payments on time. A higher credit score generally means the borrower is less of a risk and will be more likely to make timely loan payments every month. 

There are five factors that generally affect the calculation of credit scores: 

  • Payment History – Perhaps the most influential factor is a person’s payment history. It takes into account missed or late payments, how long they were overdue, and how often.
  • Debt-To-Income Ratio – The amount of credit you’ve used versus how much you have available may play a role in your credit score calculations. 
  • Credit History – The age of your credit accounts can also impact your credit scores. On average, it accounts for around 15% of your credit scores.  This is why it’s typically recommended to keep old credit accounts open, even if you’re not using them
  • Credit Inquiries – When you apply for new credit, the lender will pull your credit report, which is known as a “hard” inquiry. This can have a negative effect on your credit score, even though it may only be temporary. Further, applying for a number of different credit accounts within a short period of time can also be bad for your score.
  • Public Records – This typically accounts for around 10% of your credit score calculation. It takes into account a variety of derogatory remarks such as bankruptcies, consumer proposals, tax liens, and accounts in collections. 

What Causes Bad Credit? 

There are a number of reasons why your credit scores may have fallen. These are some common reasons that can cause your credit scores to drop:

  • Missing Payments  – If you have a habit of making late payments or missing them altogether, your credit scores can be negatively impacted. As mentioned, your payment history accounts for around 35% of your credit score, so a poor payment history can significantly and negatively impact your credit. 
  • Maxing Out Credit Cards –  Maxing out your credit cards can affect your debt-to-credit ratio, another big factor that can affect your credit scores.
  • Job loss – While your spending habits certainly play a role in your credit score health, certain things can happen that are out of your control, such as the loss of a job. Job loss has an indirect impact on your score because a number of things can come out of this situation, such as falling behind on credit card payments as a result of not having enough money.  

Reduction In income – Like job loss, getting a pay cut can influence your ability to afford the payments you’re already obligated to make. This can lead to missed payments which could lead to lower credit scores.

Credit Building Program FAQs

How long does it take to rebuild credit in Canada?

The amount of time it takes to rebuild credit varies per person. There are serval factors that can affect the amount of time it takes including how bad your credit currently is, what you’re doing to improve it and simply the passage of time. For example, someone with a couple of missed payments will likely be able to improve their credit a lot faster than someone who’s completely defaulted on a loan. 

Do credit builder programs work?

Credit building programs can work, however, there’s no guarantee. There are several reasons why:
  • One. Everyone’s credit reacts differently. While some may see significant changes from using a credit building program, others may not. 
  • Two. If you’re still missing payments or maxing out your credit cards, the potential negative effects of these actions can counteract any positive results from the credit building program. 
  • Three. Depending on the credit scoring model used, your credit scores can vary significantly from one credit scoring provider to another. 

How fast will a secured card build credit?

Each person’s credit score may react differently to a secured credit card. While some may see a bump in their credit scores in as little as a month, others may not see any changes until much later. In fact, some may see their credit scores fall, however, that may only happen if you miss payments on your secured card or have a high credit utilization ratio.  

Bottom Line

If you’re looking to build credit from the ground up or rebuild your credit, there are plenty credit-building programs for you to take advantage of.  Just remember, there’s no guarantee that any one product will improve your scores. Credit scores fluctuate for a number of reasons, just be sure to make a consistent effort to build it.

Lisa Rennie avatar on Loans Canada
Lisa Rennie

Lisa has been working as a personal finance writer for more than a decade, creating unique content that helps to educate Canadian consumers in the realms of real estate, mortgages, investing and financial health. For years, she held her real estate license in Toronto, Ontario before giving it up to pursue writing within this realm and related niches. Lisa is very serious about smart money management and helping others do the same.

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