Through their own mismanagement or through misfortune, many persons find that they have become trapped in bad credit. This may occur because they have recently gone through a divorce, or because their property has been destroyed in an accident, or because they have permitted their property to be repossessed or foreclosed upon. In any event, as credit is essential for everything from day-to-day purchases to buying houses and cars, it is important for a person with bad credit to quickly rebuild their credit rating so that they may begin borrowing responsibly.

The first step in rebuilding credit is to pay off outstanding debts. There are two ways to do this. One is to make minimum payments on all debts except for one, which is generally the one with the highest rate of interest. A debtor then makes the maximum amount of payment on that debt whenever possible until it is paid off, and then repeats the process on the next lowest rate of interest. Another way is to aggressively pay down all outstanding debts as much as one's budget allows, or even taking out a consolidation loan to pay off all other outstanding debts and then paying down the consolidation loan. In any event, paying off outstanding loans is the most important way to improve one's credit, because it not only improves one's credit by reducing outstanding debt but it prevents sudden drops in credit should one or more of the debts default.

Once all outstanding debts have been paid off, the next step in improving credit is to borrow money and then pay it off promptly, so as to prove to lenders that one is a responsible borrower. An easy way to do this is by making small purchases with a credit card and then paying them off immediately or at the end of the month. It is also often possible to take out small loans from some banks or other lending institutions and then pay them back over time. In any event, it is essential to prove that one is responsible with credit and can be trusted to pay back what is owed.

It may also be a good idea to discuss debts with a credit counselor or other person who is specialized in dealing with debt. It may also be a good idea to check one's credit rating to ensure that there are no debts which have expired or been paid off yet are still listed on the credit rating. In any event, fighting one's way out of bad credit is a long and intensive process, but an essential one.