Taylor Hutchinson acknowledges that she should have known better than to run up about $3,000 in debts.
"I was working a part-time job and not making enough," Hutchinson, 25, told me. "Then the debt collectors started calling."
Hutchinson, like many others still struggling during the long recovery from the Great Recession, now wants to get her financial house in order. She wants to improve her credit so she can buy a car to get to her job at a Home Depot outlet.
She just doesn't know where to start.
The first thing Hutchinson and others facing debt and credit problems need to do is take a deep breath and remind themselves that they're not alone. Many folks aren't sure how to build, or rebuild, credit when it seems as if the whole system is against them.
A report this year from the nonprofit Corporation for Enterprise Development found that slightly more than half of all U.S. consumers have subprime credit scores. As a result, they're paying higher rates on loans — if they can get one.
Worse, the Consumer Financial Protection Bureau reported in May that about 26 million Americans have no data on file with leading credit-reporting companies, making them essentially ineligible for loans of any sort.
An additional 19 million people have credit reports that are so limited or out of date that they're all but useless to potential lenders, the bureau found.
So let's take this in two steps: how to establish credit and how to improve credit.
Getting a credit file up and running is fairly easy. Basically, you have to borrow some money and pay it back.
Start small. Apply for a credit card from a store, bank or credit union. Carry a modest balance but make all your payments on time. Show lenders that their money is safe in your hands.
"Most of a credit score is based on payment history," said Thomas Nitzche, spokesman for ClearPoint Credit Counseling Solutions, a nonprofit organization that assists consumers with credit and debt issues. "Making payments on time is the most important thing."
Once you've demonstrated you can handle plastic, consider adding a so-called credit builder loan to the mix. These are small loans, usually under $1,000, that are typically offered by credit unions.
They're not for going out and splurging on new toys. Instead, the funds are placed in a savings account, payments are made monthly and after the loan is paid off in a year or two, the money, plus interest, is released to the consumer.
All this time, of course, the credit-reporting companies — Experian, Equifax and TransUnion — receive regular updates about your impressive money management, steadily boosting your credit score.
And here's a tip: If you're a renter, Experian will allow you to report your monthly rental payments as another example of creditworthiness. You can sign up through a rent-payment service working with Experian's RentBureau division.
Another tip: Keep away from debt collectors.
"Once something goes to collections, it's a big black mark on your credit file," said Natalie Lohrenz, director of counseling for Consumer Credit Counseling Service of Orange County. "Do what you can to prevent this from happening."
If you know you're going to have trouble making a credit card or loan payment, contact the creditor as soon as possible. Frequently, lenders will work with you to put together a payment plan that doesn't involve a debt being reported as in arrears.
Fixing a bad credit score is a little more challenging, but it's doable.
The first step is to contact each of the credit-reporting companies and obtain a free copy of your credit file via the website AnnualCreditReport.com. This will allow you to see what creditors are seeing — and then take steps to remedy things.
Pay off any outstanding debts, if you can, or negotiate a partial payment with a debt collector. Remember, however, that once a debt has gone to collections, it will stay on your credit file for seven years.
"Your best friend at this point is time," Lohrenz said. "The older a negative event is, the less it impacts your credit score."
Keep in mind as well that each state has a statute of limitations for most consumer debt. In California, for example, that limit is four years.
This means that if you're sued by a collector after four years, you can have the case thrown out of court. But your credit file will still show the debt as unpaid until seven years have passed, and this will affect your ability to secure a loan or pay lower interest rates.
Once the seven years are up, you're in the clear. Your credit score will be recalculated as if the financial faux pas never occurred.
"Consumers shouldn't feel intimidated by the process," said Bruce McClary, vice president of the National Foundation for Credit Counseling. "But they should have realistic expectations. It won't be instantaneous."
After you have your financial act together, learn from past missteps and do your best not to repeat them.
Jen Mulder, a financial planner, said one key to avoid future money troubles is to keep track of all financial obligations.
"Make a list of the bills you have to pay each month," she said. "Stay on top of them and pay them on time."
I passed along these various suggestions to Hutchinson, who seemed surprised that addressing her credit and debt woes wasn't like climbing Mount Everest.
She promptly visited a bank and applied for a credit-builder loan.
It was approved.
David Lazarus is a columnist for the Los Angeles Times.