It’s easy- remember these two audio engineering axioms:
1.) Garbage in = Garbage out
and
2.) No one enjoys polishing a turd!
That mic is designed for recording speech (and probably not for the sake of recording music like singing and instruments). The limitations of that mic are going to be its dynamic range (its ability to record soft and loud), its frequency response (its ability to record and reproduce tones acurately), and its inherent noise (the hiss and general lo-fi-ness!) So if you can live with that, then just be aware that those are limitations you’ll need to plan for.
On the mic side if you go into your control panel settings for sound, somewhere there may be a dial or slider for adjusting the mic input. If you set that slider lower you won’t amplify the incoming signal as much, which may reduce the distortion you’re hearing when your performance gets loud.
Proximity to the mic can also help to reduce distortion, but this comes at the risk of not picking up the low (soft) points of your performance. You could try and practice moving closer or further from the mic during the performance, a few inches may make the difference…if you’ve ever seen performers holding mics to their face and when they belt out a loud note they pull the mic away from their mouth a bit, you can see what I mean.
Lastly, try and mitigate any room reflections, to clarify the sound of your performance. With a Lo-fi mic, any unwanted room reverberation will just add to the muddiness of the sound.
Good luck with that…also try researching some USB mics…a company called BLUE (Baltic Latvian Universal Electronics) makes some great sounding USB mics for not that much money.
Cheers!