If you have a really bad credit score, you may worry that you can't get a loan to purchase a car or home. To fix a really bad credit score, don't trust businesses claiming to wipe away credit problems for a fee. Instead, take steps on your own that will improve your financial health and your credit score will naturally benefit.

Know the Score

Once you have been denied credit, and once per year regardless, you are entitled to a free copy of your credit report. Check it for accuracy. There may be debts attributed to your report in error. Dispute any claims that are inaccurate in writing and send the letter by Certified Mail, Return Receipt Requested. Include copies of documents you have to dispute the items. After investigating your dispute, the credit reporting agency must notify you of the results. If the credit reporting agency agrees with you that the disputed item is inaccurate, it will remove it from your report. If the credit reporting agency disagrees with you, you can still request that a copy of your dispute remain with the file. Future credit inquiries receive a copy of that dispute with your report, which may improve your credit.

Pay It Back

Stop using credit. A high amount of debt in relationship to how much money you make creates bad credit. Keep your balances low. Create a household budget and stick to it. Keep any accounts open that you can currently afford to pay. Closing an account may impact your credit negatively. If you are behind on your payments or cannot make the minimum monthly payment, call the company and ask for a lowered payment in exchange for suspending or closing the account. Because credit card companies report every month you're late, closing or suspending the account won't hurt you more than the late notice you're already getting on your report. If, after calling your credit companies, you are not able to work out a payment arrangement you can afford, consult a non-profit credit counseling company. These companies negotiate with credit companies to allow you to pay back your debt on a schedule at a reduced rate. If you have old money judgments or bills on your credit report, they will not be included in your payback plan with the credit counseling agency. Once you can afford to pay your current debts, try resolving your older debts. Because problems remain on your credit report for seven years, they continually lower your score. Contact the creditor and pay the debt. If you can't afford to pay the entire amount, work out a settlement agreement. Sometimes creditors agree to be paid back only a portion of what is owed instead of risking getting nothing. Make sure that the creditor agrees to report to credit reporting agencies the debt is "paid as agreed" after you have paid your settlement amount.

Bankruptcy

Many debtors avoid filing for bankruptcy because they're worried about their credit. If your credit is really bad, it's likely it can't get much worse by declaring bankruptcy, and it may get better. After a discharge of debt in bankruptcy, your unsecured debt will be gone, giving you a lower debt-to-income ratio. After bankruptcy, pay your utility bills on time. If you get a credit card, pay it off every month. Bankruptcies stay on your credit report up to 10 years, but a few years of responsible spending and saving can help repair your credit.

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Credit Repair: How to Help Yourself

Building a Better Credit Report