Highlights

• Interest rate increases do not have a direct impact on credit scores.
• Managing rate rises is an important element in overall financial wellbeing.
• Good financial habits are the best way to reduce the indirect impact of interest rate increases on your credit score.

After an extended period of record-low interest rates, the Reserve Bank of Australia cash rate increase in February 2026 has sent ripples through the Australian mortgage market. You are probably not only asking “How much will my repayments go up?” but also, “Will this higher rate damage my credit score?”

The short answer is that interest rate increases alone do not impact your credit score. But the more complicated and comprehensive answer is that an interest rate hike can create financial pressure. In worst case scenarios, this pressure can turn into a chain reaction of events that can result in mortgage stress – and that absolutely will negatively affect your credit score.

Put simply, it’s your repayment behaviour, not the interest rate itself that impacts  your credit rating. Whether the interest rate is high or low is not an influencing factor.

It’s helpful to understand how your credit score is calculated so you can take proactive steps to manage your financial health in the face of rising interest rates.

What loans and borrowings impact your credit score?

Equifax calculates your credit score using proprietary algorithms to assess data across a range of factors. Our comprehensive credit reporting takes into account metrics including:

• How many credit cards (including store cards) you have, and their maximum limit
• Existing loans for household items, personal purchases (like vehicles), or for family reasons
• Your current and past debt, including repayment history
• Any default judgements or bankruptcy records against your name (if applicable).

This means that while interest rates are not a direct factor, an increase in rates can have an impact on your total amount of debt and the repayment amounts you need to pay. If you have borrowed a high amount, even a modest increase in interest rates can significantly impact repayments which may then result in a situation like only making minimum payments on a credit card, or missing a bill payment. A track record of late payments is a factor that can negatively impact your credit score.

How can you protect your credit score as interest rates rise?

Not all loans and credit products will be impacted by increased interest rates. Many credit products, like some car loans, are fixed rate products so your repayments remain consistent for the life of the loan.

For Australian consumers, two of the most significant credit products that are impacted by increases in interest rates are variable rate home loans and credit card accounts.

When interest rates rise, this means the amount you owe on your variable rate loan or your credit card balance increases, and your repayment amount also increases. For some borrowers, there is the risk that these increases can tip you into mortgage stress (officially defined as paying more than 30% of household income on mortgage repayments). While this is recognised as a blunt metric with many other factors influencing overall affordability, it is nevertheless a risk that needs to be considered by lending providers.

To minimise the impact of interest rate rises, there are several strategies that you can implement. This can include:

• Using a fixed rate personal loan to pay off credit card debt
• Investigating fixed rate mortgage options
• Using an introductory 0% balance transfer credit card offer to pay down card debt
• Work with a credit counsellor to get help managing your finances. 

If you are facing financial stress, remember that help is always available. Working proactively with your bank or lending organisation can give you access to strategies to overcome short-term challenges, minimise your risk of entering mortgage stress and maintain a good credit score. (PS - Worried that using a financial counselling service might lower your credit score? Seeking support will not have an impact on your score, and is a great way to get help before you end up in a situation with a negative credit event on your record.)

It’s also important to build and maintain good financial habits, especially as interest rates rise. Actionable strategies include consistent on-time payments, avoiding defaults, and minimising credit applications.

Want to keep on top of your credit rating? You can sign up for our credit report alerts as well as identity protection to keep on top of scams and how your personal information is being used on the web for as little as $9.95 a month. Check out our plans and how they can help you take control of your credit rating and identity risk.

Disclaimer: The information contained in this article is general in nature and does not take into account your personal objectives, financial situation or needs. Therefore, you should consider whether the information is appropriate to your circumstance before acting on it, and where appropriate, seek professional advice from a finance professional such as an adviser.