Tikka T3 A1 / Barrel - Yuck

I bought a Tikka A1 308 from my LGS awhile back. Have taken it to the range a couple of times and it functions fine but the groups were a bit big - Well over 1MOA
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, but didn't think too much about it since I was shooting crappy ammo

Took it over to a buddies after shooting last weekend to work on it. While there he ran his bore scope down the barrel - Can't say I really know what I am looking at but it doesn't look good - Yuck!

Is that pitting? Rust?

How would you suggest I proceed with this barrel? Thoughts?
 

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Check your action Mount screw torque, scope mount tightness, and alignment. I would then try some Federal Gold Medal 168 grain. If the gun still does not shoot have buddy try it. After all of this I would maybe think of a new barrel.
 
That’s a lot of corrosion, usually indicative of poor maintenance practices, poor storage conditions, corrosive ammonia, etc

I’d also suggest cleaning with an abrasive cleaner like JB Bore Paste and seeing how it shoots. Sometimes barrels that look bad still shoot well.