It’s common to wonder what’s a good credit score in Canada, and with this, we find ourselves searching for ways to improve that magical three-digit-number. A credit score ranges from 300 to 900. Whereas having a low credit score – 620 or below – leaves us with limited options when it comes to financial products, a credit card could help us out. There’s a big difference between a secured vs unsecured credit card. One can help consumers with bad credit improve their credit score, practice good habits and prove their creditworthiness to lenders over time. Let’s find out more.


What Is A Secured Credit Card?


A secured credit card is a type of credit card suited to someone who has bad credit or no credit. It requires the user to place a refundable security deposit as collateral until the credit account is closed. Your security deposit all depends on your credit profile and your card issuer’s requirements.

For lenders when dealing with someone who may have no credit score or a poor one, a deposit will mean they have something to fall back on in case you don’t make your payments. It helps alleviate the risk of having a poor payment history or in some cases when someone has not yet established a credit score in Canada.


How Does A Secured Credit Card Work?


For example, you’re approved for a $1500 credit limit. You will then write a cheque to your credit card issuer for $1500 and in a case, you don’t make payments, this will be used as collateral against any outstanding payments. Your security deposit will all depend on how much credit you are approved for. This will also become your spending limit, which means you cannot exceed the amount that you’ve paid as a deposit.

This prevents you from spending more than you can afford to repay. This feature benefits both you and your lender, meaning you won’t go into further debt and the lender will have the borrowed amount returned. Depending on your lender, you can generally add more money to your deposit overtime if needed. It’s important to note

You might wonder how a secured credit card differs from a debit card. Well, unlike a debit card, a secured credit card allows you to increase credit. This is because your card issuer reports your payments to the credit bureau.

How Can A Secured Credit Card Help Improve Credit?

Credit cards are a great way to improve your credit score. If you have a poor credit score, a secured credit card will help you on your way to your target score. As discussed, since you pay a security deposit for a secured credit card, your approval is usually quick and easy and doesn’t require any credit checks. This way your amount is secured with your lender and is used as your credit limit.

When you pay back your amount to your lender, they will report each payment as positive to the credit reporting agencies TransUnion or Equifax. This way, you will slowly but surely begin building a payment history. Your payment history makes up for 35% of your credit score, which is why establishing a credit history is important. If you’ve never had a credit card, you will not have a credit score. So, when you obtain your first secured credit card, it’s important to ensure you make your payments on-time or even early. This way, you setting yourself up to have a great credit score, or to further increase your credit.

There are many more ways you can improve credit using a credit card. Find out more here.


What Is an Unsecured Credit Card?

An unsecured credit card doesn’t require a deposit. When we think of a credit card, an unsecured credit card is the first one that pops to mind. Your lender will check your credit history and score, and will approve you based on your creditworthiness. The application for an unsecured credit card is generally a lot lengthier than a secured credit card, and approval is not as simple. Since you don’t have a security deposit for your lender to fall back on, they need to ensure you have a good credit profile and income before they approve you.

Unsecured vs Secured Credit Card: What’s the Difference?

Generally speaking, unsecured credit cards are a better deal for customers. This is because an unsecured credit card doesn’t require a security deposit. Unsecured credit cards also tend to come with better perks and rewards, lower fees and lower interest rates. This card is ideal for someone who may already have established or a good credit score. Someone with a credit score lower than 650 may struggle for approval for an unsecured credit card.


A secured credit card requires a security deposit as collateral and is suited for someone with poor or no credit. Think of it as you’re “securing” your credit card with a deposit. It helps you establish or increase credit, and also allows you to not surpass your credit limit, making it more affordable. When establishing and trying to improve credit, it’s important to keep track of your score to see how it’s improving. Find out how to monitor your credit score here.


Marble Financial (CSE: MRBL; OTCQB: MRBLF). We are a group of forward-thinking financial technology experts who that understand Canadians occasionally need help in achieving longer-term credit health. Through our industry-leading proprietary technology solutions Fast-Track Loan, and Credit Meds. We guide our customers back to mainstream credit 50% quicker than traditional methods. Since 2016, We are proud to have empowered thousands of Canadians to a positive financial future. With this, we continue to establish ourselves as a leader in financial wellness.