Are you worried about rising interest rates? These tips can help you balance your budget and protect your credit scores as interest rates rise.

Reading time: 3.5 minutes

Article Highlights:

• Paying all your bills on time, every time, can help you protect your credit scores.
• Maintaining good credit scores can help you negotiate lower interest rates.
• A budget planner can help you cut back on non-essential spending and swap out more expensive items for bargains.

Interest rates have been rising quickly in 2022 and inflation is making everyday purchases — from groceries to gas — more expensive. If you’re finding it harder to make ends meet, you’re not alone. 

You might be tempted to skip a bill payment here or there. Or maybe you’re thinking about paying less than the minimum payment on your credit cards to free up some cash. But these choices can drive down your credit scores, which can make it harder and more expensive to borrow money when you need it.

Read on for tips to stretch your hard-earned dollars while also protecting your credit scores.

4 tips to help you save money 

1. Stress test your budget. List all your variable rate debts (mortgage, line of credit, student loans from a bank). You can use this mortgage calculator to calculate your payments if there’s a 1, 3 or 5 percentage point increase. How will the increases affect your budget? If you can’t afford more interest rate increases, you can speak to your lenders about possible solutions, such as locking in a rate that you can afford. 
2. Look for savings in your budget. Use a budget planner, like this one from the Financial Consumer Agency of Canada. List your income and your monthly expenses. Look for ways to cut back on non-essential spending and swap out more expensive items for bargains. That might mean cancelling a streaming service you don’t use or shopping at a less expensive grocery store. Put any savings onto your debts. 
3. Consider consolidating your debts. Debt consolidation is when you roll some or all of your debts into a single monthly payment. The main appeal, aside from only paying one bill instead of multiple bills, is that you can sometimes negotiate a lower interest rate and hopefully pay it off faster. Learn more about debt consolidation.
4. Find ways to earn more money. Ask for a promotion or discuss a raise with your manager that’s in line with inflation, get a new job or start a side hustle. Then use that extra money to pay down your debts.

6 tips to help you maintain your credit scores 

1. Pay the minimum payment, on time, every time. If you can’t pay off the full balance on your credit cards, pay at least the minimum payment shown on your statement by the due date. If you don’t, the financial institution may report a late payment to the credit bureaus. Late payments stay on your credit reports for six years and can negatively affect your credit scores.
2. If you can, pay more than the minimum payment on credit cards and lines of credit. This can help you pay off your debts faster — so you pay less in interest — and can help improve your credit scores. 
3. Pay your bills on time, every time. This doesn’t just include credit cards – late or missed payments on other accounts, such as cell phones, may be reported to the credit bureaus, which may impact your credit scores. If you’re having trouble paying a bill, contact the lender immediately. Don’t skip payments, even if you’re disputing a bill. 
4. Keep your credit card balance well below your credit limit. A higher balance compared to your credit limit may impact your credit scores.
5. Delay big purchases. If you need to borrow money, don’t borrow more than you need. Test your budget to make sure you can afford the payments.
6. Check your credit reports regularly. Check your credit reports to ensure your personal information is correct. If you find information you believe is inaccurate or incomplete, contact the lender or creditor. Remember — checking your own credit reports or credit scores won’t affect your credit scores. There are two nationwide credit reporting agencies – Equifax and TransUnion – both of which maintain consumer credit reports containing information reported to them by lenders, creditors and other sources. Your credit report may not be identical with each of the two agencies, as some lenders may report information to both of them, just one, or sometimes none at all.