You've been turned down for a loan or offered a ridiculously high interest rate. You can't get a new credit card. You've got bad credit.

What is 'bad' and how can you fix it?

The primary indicator of poor credit worthiness is a low FICO score, around 650 or lower. Below 500 is off the chart. FICO is a number calculated by the three major credit reporting agencies that takes into account total outstanding debt, number and length of late payments, and other factors.

The first steps to correcting the situation are usually highly personal. You may have trouble with self-discipline or find it difficult to keep financial commitments. Those factors may require a counselor or a credit repair specialist.

But other, more practical, steps are in your direct control.

Start by getting a copy of your credit report from all three major agencies: Experian, Trans Union, and Equifax. This can be had yearly for free. Review the documents thoroughly, with the help of a financial expert, if necessary.

No official statistics exist but estimates of credit report errors range from 8%-40%. Some are minor, such as incorrect age, address, and so forth. Some are not, and include accounts shown as open that were long closed, and even debts that were acquired by another person. So make sure that everything on your reports is accurate and up-to-date. But, be honest with yourself. The agencies make concerted efforts to check when pressed.

Make a detailed, realistic budget that includes all monthly expenses and a buffer for unexpected amounts. Then, call your creditors. If you encounter an unsympathetic person, remain polite. Ask for a supervisor, if necessary. Tell them frankly what you can pay and ask for a reduction of the debt. They may not grant your request immediately, but after a few months of steady repayment and a follow-up call they may reconsider. Keep notes of the agreement and keep your word.

Cut up and return as many of your old cards as you sincerely do without. Keep paying on the outstanding balances until the account is zeroed out, or you can convince the creditor to forgive the remaining debt.

Pay off what you can, as you can. Pay off any mortgage loans first. Then proceed to small amount, high APR debt. Pay off those accounts completely. Then move on to larger balances. Do your best to always pay something monthly on every account, though.

When applying for a new card, you have some options. A secured card, for example, is obtainable no matter what your present credit situation. It's usable just like a regular credit card, but the credit limit is determined by how much actual cash you pay into the account. Remember, this card is for real emergencies only.

Other, non-general purchase, credit cards may be easier to get while you are increasing your credit worthiness. Department store or gasoline cards, used responsibly, are one way to get started improving someone's view of your level of risk.

Fixing credit worthiness is less like repairing and more like mending. A repair replaces a broken part and you're on your way. Mending takes time and patience, whether what's broken is an arm, a sweater, or your credit reputation. Stick with it.

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