The new year has heralded new lending rate increase which is positive or negative news depending on your financial standing. As the rate of inflation rises, the the Central Bank has been compelled to raise the base rate by a quarter of a percentage. This was unforseen, as rates were raised at least once towards the end of last year. It seems that made no impact on borrowing - particularly home loan lenders - and spending which affect inflation thus the need for a second rate rise in such a short while.

This unforseen rate rise is welcome news for investors with money in the bank, chiefly those with index-linked accounts such as ISAs and TESSAS. Index-linked savings accounts yield the most when rates rise. The disadvantage is that, returns are low when Interest rate are lower. With this latter increase, some of the rates on offer and indeed good, some over 9% for high rate taxpayers and over 7% for base rate taxpayers. Saving in ISAs are tax-free and you get to save a fixed amount every year. Interest is added each month depending on the prevailing rate. The more income is added each year, the more return on investment the account holder receives. Needless to say,Ordinary investment accounts have also benefited from this rate rise but not as much as their index-linked counterparts. An average of 0.15% to 0.65% has been added by banks to their rates.

Although, raising interest rates has advantages - such as cooling the economy - , it is more of bad news than good news for the average credit consumer. Some businesses have not fared well over Christmas, with consumers less willing to overspend. Insolvencies are on the up as inflation rates combined with a variety of factors have forced small businesses out of the market. Business bankruptcies is dwarfed by the number of private insolvencies. Going broke can be very trying both for businesses and individuals. Even when the ordeal seems to be all over, a record of it is available on your credit history for seven years or more. During this period, any borrowed credit is likely to come with a high APR. Even low interest credit cards can prove elusive.

For borrowers, making small but considerable changes can help improve credit score after lending rate rises. If you are on a variable rate for your mortgage for example, acquiring a fixed rate one is a wise move if the circumstances are right. Bear in mind that you may have to pay for chaning. Some creditors will charge you a certain percentage of your total borrowing if you opt out of your contract, whereas some may not charge anything at all. Other charges include arrangment fees which can be a hefty sum especially if the fixed-rate on offer is a bargain. Other ways in which improve credit includes paying bills on time whether it is credit cards or energy bills as well as mortgage.

In the end, rate rises affect people in two different ways. If you are a saver, you win. If you are in debt, it can affect you badly depnding on what form your debt takes.