There are lots of ways you can end up with bad credit, and in fact, even never having borrowed money and having 'no credit history' can also be problematic. Building your credit rating from nothing, or after a period in your life when you ended up with a negative credit record takes time, though it can be done relatively easily using things like credit building credit cards. This is well worth investing the time and effort into, because bad credit can hold you back in more ways than you may at first think. Here are just three of the ways a bad credit rating can affect your life:
Fewer Financial Products
While there are personal loans for people with bad credit, and credit cards you can still get, you will face an extremely limited choice, low amounts you can borrow and higher prices on any credit products. There will also be some financial products you may struggle to get at all, like mortgages, or high priced items like cars on finance. This may not seem like a limitation right now if you don't want or need to borrow any money, but for most people the time comes when they do want access to credit products, even if it is only when they buy a house or want a credit card for emergencies. Correcting a bad credit record now, when it isn't really causing you any problems, could be something you'll thank yourself for in a few years from now.
Difficulty with Renting a Home
If you try and rent a place to live privately, there will usually be a credit check. Letting agents and landlords may refuse you on the basis of having bad credit, or may ask for a much bigger deposit or number of months of rent upfront. There are things that you can do in this situation if it is preventing you from securing a place to live, for instance getting your parents to help you, but obviously there aren't solutions like that available to everyone, and it can end up being a very difficult position to be in. Improving your credit rating, as well as having good references from previous landlords and proof of income, will give you a lot more choice when it comes to where you can live.
Employer Background Checks
One other possible way your poor credit history can bite you is when you are looking for a job. In some industries such as finance, and in jobs where you might handle cash or sensitive financial data, it is standard for potential employees to be given a credit check, as well as other normal checks employers can make such as contacting referees. A bad credit history won't always stop you getting a job, but it can be something an employer will see as a red flag.
Take steps as soon as you can to start improving your credit rating to avoid these and other issues.