how dreadful has holding a bad credit rating been in your life?

[OtisTheMarsupial]

OK, first you get your credit report from
annualcreditreport.com
and you look it over for inaccuracies. Dispute the inaccuracies immediately (it takes months sometimes for them to fix things).

Then you call the creditors you have bad accounts with (late payments, in collections...) and you see if you can work out a payment plan. Key issues here - you offer to pay off some or all of the debt, they offer to DELETE the debt. Get the agreement in writting.

They won't negociate? Send certified letters to the reporting agencies (transunion, equifax, experian) disputinng the debts. Just ask that they "show proof or remove." If the creditor kept poor records, then they might delete the charge, or at least you're in a better bargaining position. (You might have to do this a couple times for it to be effective)

Then, choose to wait it out or pay them off. Making consistent payments is usually just as good or better than paying them off completely as far as credit scores go. It puts the account in good standing.
If you wait them out, then just make sure you don't incur any new bad debts for about 7 years. (caveat - if it's a big debt and you're trying to get a loan for something else, you should consider paying it all off because that will affect your dept to income ratio. But if you have some time, you should pay it off in a few payments rather than all at once. This is because consistent, smaller payments is what the creditor is looking for.)

Consumer credit counseling will help you buget and help pay off your debts, but you really shouldn't do that until you're close to bankruptcy becuse it WILL affect your credit.
Instead, take some money management classes or research on your own.

Most important thing to remember is your credit score is a reflection of how risky loaning money to you is. This is NOT the same thing as a determination of how good you are with money or how good of a person you are. Creditors look at your debt to income ratio and your history of paying off debts.

They don't care if you're wise about money and thus bought things in cash - because they can't make much money off you. Creditors earn their livings from interest, so that means they PREFER someone who makes the minimm payment every month for 5 years rather than the person who pays it all off in a year but missed one payment in March.

Also, pulling your credit report a lot doesn't impact the score. Trust me, the more often you see that damn thing, the better. It's almost always got some innaccuracy that you need to fix and the only way you can fix it is to see it.

Last note, there are a ton of myths and misinformation about credit. There are a lot of people who want your money and there are various routes they can take to get it. They will lie.