You just applied for a mortgage, a car loan, a home equity advance and you were turned down. What happened? You didn't realize how bad your credit history was until this new episode. Once you have got over the shock, get started on finding out just how bad your credit really is. Get your free credit report from all three of the big three reporting agencies - Experian, Equifax and Trans Union. You are entitled to one free credit report a year from each of them.

So is it really an ouch or a series of errors and glitches. Go through all the credit reports and make sure every single item reported there is absolutely accurate. One of my credit accounts recently showed a bankruptcy filing against a store account that had been fully paid off four years before.Since, I've never filed bankruptcy, you can imagine how that made me feel. My credit score had dropped precipitously as a result. That was bad enough, but getting the entry removed was not easy. It took months and numerous letters and copies of documents including a copy of the bankruptcy filing by another person with the same name as me. All of this merely to say, mistakes are made. Get your reports to accurately reflect the real you.

Once the reports are accurate, you need to work on the "bad" history. Missed and late payments will all be there for the world to see. Vow not to miss any more from now on and set all your accounts on automatic withdrawal to take care of the future. Just remember to write up your check book accordingly. You don't need to add unapproved overdrafts to the history.

If you have any debts reported that you have not paid off, contact your creditor and offer a plan to repay the debt over time. Most creditors are more than willing to work with you. A paid debt is worth a lot more to them than an unpaid one. The fact that repayment came late will not weigh as heavily as a debt ignored or avoided.

Start paying all your current obligations on time. The more you put on automatic withdrawal the better since you can avoid late payments due to getting too busy or forgetful. You should be aware that 35 percent of your credit score is calculated on the timeliness of your payments. If you pay down all your credit cards to less than 50 percent of your credit lines will help your score as the available credit expressed as a percentage increases.

Realize that repairing a bad credit history is something that will take time. As you make the changes suggested you will find that your history will steadily improve. At some point in the future you will be able to move through the levels until you have a good rating on your credit and your FICO score will reflect this also.

As you work on your credit practices, adopt a simple budgeting plan for your finances and stick to it. Be sure to curb spending, particularly those on luxuries you can do without and start saving. Make a savings cushion of 6 months living expenses a goal.