You'll need a good texture to use for this. Here is the image I will be using – go ahead and save it to your computer if you want I own the image so feel free to you use it for anything you want. It's a pretty simple image. Just a picture of a wooden fence in my backyard. I find that worn wood works pretty well as a texture for creating distressed type. Anyway, grab the image or use one of your own – once we get started you'll realize what type of texture image you need to make this work well.
Edit the Texture Image
We will start off by opening up the texture image in Photoshop and hit ctrl + shift + u to Desaturate the image. OK, that's it for the moment, but we will be coming back to this image in a few.
Let's open a new file in Photoshop. File->New… The size doesn't really matter for this tutorial – I'll make mine 512px X 512px Resolution: 72.
Next, get the Text tool (shortcut 't') set the text size to something big like 62 and type something out..
Now, go ahead and rasterize the type by right-clicking on your text layer and selecting Rasterize Type. Let's bring in the texture.
Distress the Text
Switch back to the texture image we opened in Photoshop earlier.
Grab the Magic Wand Tool (shortcut 'w') so we can select part of the texture image.
This can take a couple of tries to get a good selection. The idea is to get plenty selected but we want to keep some empty(or unselected) spaces as well. Example image:
With the Move Tool drag the selection we just created into our file with the text.
Next, ctrl + left-click on the little image in the Layer 1 layer. This should select our texture.
Now, hit ctrl + shift + i to inverse the selection.
Click on the layer with our text to make it active and hit delete on your keyboard.
ctrl + d to deselect everything.
Finally, click the little eye next to Layer 1 to turn it off, and you'll see your finished product.
Note: you made need to move the texture around before hitting the delete key. Make sure that none of the letters in your text show through the texture image too much. The white area is what will get deleted from the text itself.
Not the conventional use but it looks good:
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