Travel is one of the best things you can do for yourself in terms of personal development, but it does come with certain requirements if you actually want your plans to push through and go smoothly.
You might think that as long as you have some cash tucked away, surely your credit won’t affect your travel plans too much. Unfortunately, that’s wrong. Whether you’re going to a different state or an entirely new country, the state of your credit will impact your travel in a lot of ways.
Make sure you know the biggest reasons why it can affect your plans so you can adjust accordingly.
1. Higher Interest Rates
When you have bad credit, companies and financial institutions tend to impose higher interest rates. This can cover all manner of things that could relate to your trip, including credit card usage, international transactions, and personal loans. If you want to minimize the costs of trip expenses, you’ll want to get the lowest interest rates possible.
2. Harder Loan Approval
Your credit standing is a major factor for lenders when considering your approval. This is because they use your credit score to assess whether or not you are a risky lendee. If your score is too low, chances are that lenders will perceive you as unable to make payments on time.
If you want to get a travel loan but have bad credit, you’ll either get approved for a smaller loan than you want or just get denied right out.
3. Limited Access to Travel Insurance
Based on data from Insider, only around 38% of travelers get travel insurance. Despite that, most people surveyed actually want to get travel insurance.
This gives you protection in the event of unexpected emergencies, lost luggage, and other circumstances that you may not be prepared for financially. If you don’t have good credit, you are likely to get limited coverage options and higher premiums.
4. Lower Credit Card Approval
Credit cards are a useful resource to have, especially if you want to travel to other countries. All legitimate credit card providers will perform a hard credit check, which gives them all the details of your credit history.
Low credit will likely hurt your chances of approval, especially since applying for a card in the first place affects it already. The biggest issue you might face with hard vs soft credit checks is that the former lowers your score temporarily and can even label you as higher risk as you get pegged with credit-seeking behavior.
5. Fewer Travel Deals
If you want to save your money for travel, one of the best things you can do is to look for travel deals. This means coupons, promo codes, exclusive deals, and partner offers. If you have bad credit, this could limit your access to legitimate deals that aren’t sketchy and make an actual difference to your budget.
6. Difficulties with Accommodations
Bad credit can hurt your rates and means of payment, forcing you to settle for locations that you didn’t want in the first place. It’s especially problematic if you’re looking to get an extended stay somewhere, which usually means rental homes that have landlords who may perform soft credit inquiries before accepting your booking.
The last thing you want is to have to get a short-term rental with excessive fees or other issues, especially now that even popular platforms are experiencing an uptick of poor experiences for travelers.
7. Lack of Emergency Funds
No one wants to get hit with an emergency, but life can be unpredictable. If you travel without good credit, it hurts your options when you suddenly need funds for an unexpected situation. Your credit limit may be smaller and you could have a hard time getting a loan if you don’t already have a tucked-away pool of cash for emergencies.
8. Limited Transport Options
Surveys of holiday travelers reveal that some of the most stressful factors that ruin a trip include heavy traffic on highways, arriving at public transport stations late, route delays, and having to find seats on crowded trains or buses.
The usual solution to that would simply be to rent a car, but doing so can affect your credit score. That wouldn’t be a big tradeoff unless you’re already starting off with bad credit. Plus, many rental agencies will perform a credit check first if you plan to pay using debit or credit.
9. Higher Deposits
There are many services you may need when traveling that require a deposit. The trouble is that many institutions will impose a higher deposit requirement if you don’t have good credit. This is simply a safeguard on their end to ensure that you’re good on your word, but it can hurt the pockets if you’re on a tight travel budget.
10. Limited Perks and Offers
Credit card perks and exclusive offers can be really great for making travel more comfortable. You get access to discounts, amenities, and points that ultimately make the experience smoother. Of course, these offers usually only apply if you have the credit to qualify.