How to handle a horrible friend?

First talk to her about it nicely and tell her your feelings and how you want her to change. If she doesn't listen to you then just straight up tell her that you don't want to be friends with her anymore. If she starts talking behind your back first try to ignore it. However if she is making up lies that are hurting your image then you should tell your parents and/or principal about it and maybe bring one of your real friends with you to back you up when you report it to a teacher or principal.