When bad things happen to good people is a common refrain among people who used to enjoy stellar credit. Because of financial mismanagement, illiteracy, or hardship, they've fallen off the good credit wagon. The challenge is: How does one get back in the good graces of one's former creditors?

A second group of people fall in the category of the "Credit Virgins". Those are individuals who've never had credit before, cannot get credit because of a lack of credit history. There lie the conundrum, the quandary, the catch 22. On one hand, in order for a financial institution to issue credit to a potential debtor, a credit history is required. On the other, how does one establish a credit history, if credit has never been extended before?

Let's address both. If you used to be the darling of the credit world and fell from grace, or you became so radioactive (credit-wise), that no creditor would dare touch you with a 10-foot pole, there is no need to panic or be ashamed. Consider it a learning experience. People learn two ways: from their mistakes, and/or from others'. You've learned your lesson by now. It's time to move on. It's not the end of the world. It's the end of an old credit world (as you used to know it), and the beginning of a new credit world (as it should be). You are now, or going to be, a financially educated consumer, a savvy potential debtor.

Regardless of the financial entanglement (bankruptcy, foreclosure, missed credit cards payments, etc.) you've found yourself credit-wise, the best weapon against bad credit is good credit. The best antidote to bad credit is good credit.

^{Cash & Credit go hand in hand (by Candle). Credit Cards: If you can't get a Master, get a Slave! If you can't get a VISA, get a PASSPORT! If you can't get an American Express, get an American Local! Last, but not least, if you can't get a Discover(y), get a Recover(y)!}

1. Department Store Credit Cards

Department Stores need to unload their merchandises. If extending credit (provided you pay on time) to you will ease the process, they'll be more than happy to oblige, with a 10% to 15% instant discount as an incentive. Department store credit card's rates tend to be higher than those of their regular couterparts,i.e VISA*, MasterCard, American Express*, etc. Provided you pay your bill on time and in full every month, interest rate is a non-issue. You need to get your foot in the credit door. If that what it takes, so be it!

Should you obtain the card, do not use it as an excuse to live beyond and above your means by embarking on a shopping spree. Buy only what you need, not what you want. Remember: You're building a positive credit history, not a negative one.

For more information on Department Store Credit Cards, read L. Marie Dubuque's article on Department Store Credit Cards: Easy To Get And A Good First Good Credit Card Even With No Credit History at:

• www.consumereducation.suite101.com

For the best sites for Department Store Credit Cards, check out Bessed's 42 of the best sites for credit cards from department stores at:

• www.bessed.com
  

If strategy #1 fails, it's time to explore # 2

2. Passbook Loans

It's a simple strategy. Open a saving account or CD (Certificate of Deposit) at a bank and borrow against your deposit or CD as a collateral, at a rate slightly superior to what your account is earning from the bank. Take the proceed of the loan and open a second saving account or CD at a different bank. Repeat the same process at a third bank. Before you proceed with that approach, make sure you ask the following questions:

- Does the bank make passbook loans? If so, what percentage (90% is good) is loaned and at what rate?

- Are your payments reported to the credit bureaus (Experian, Equifax and TransUnion)? If so, with which frequency?

If the answers to those questions are unsatisfactory, find yourself a bank (or banks) that does both: Issuance of Passbook Loans and, most importantly, reportage of payments to the credit bureaus. Otherwise it's a financial exercise in futility, a vain attempt at establishing or reestablishing credit. To locate a Financial Institution (Bank), engine search keywords Passbook Loan.

The whole process takes 6 months to a year to get the job done. Make your monthly payments (using the proceeds of the loans, and then some, to pay back the loans) on time, as agreed. Before you know it, you'll get a brand new positive credit history, with an enviable FICO score, and you're ready to take on the credit world with a vengeance. Before you apply for new loans, pull your credit report to correct erroneous entries, if any. You'll start receiving pre-approved credit card offers in the mail, take advantage of those.

Assuming that you have not defaulted on your Passbook Loan, you should then apply for a Signature Loan or Personal Loan (uncollateralized). If your application is declined, consider other strategies.

You need $500 to $1000 to implement strategy # 2. You don't have that kind of cash? No problem. Strategy # 3 to the rescue.

3. Secured Credit Cards

The strategy, once again, is simple. Open a Saving Account with a deposit ranging from $200 to $10,000 at a bank. A credit card is issued against the deposit as collateral, with a credit line up to the amount deposited.

Benefits: No credit Requirements (Approved Regardless of Credit History), No Income Requirements, Credit Bureau Reporting. Your Income, Employment and Credit are not factors, Accepted at 27 million Locations Worldwide and Online, to name just a few.

Drawbacks: Application Processing Fee, Annual Membership Fee, High APR (Annual Percentage Rate) for most, etc.

Do your homework. Read the fine prints, compare and contrast rates and fees, grace period and charges before you pick a card.

Credit Cards come in all types

Card Type: Low Interest Cards, Balance Transfer Cards, Student Cards, Cash back Cards, Frequent Flier Cards, Gas Rewards Cards ( easier to get, if you care to apply for one, good to excellent credit is required), Reward Cards, Business Cards, Cards for bad Credit, Prepaid Cars, Charge Cards, Secured Cards and Retail Credit Cards.

Credit Type: Excellent Credit, Good Credit, Average Credit and Bad Credit.

Card Issuer: American Express, MasterCard, VISA, Discover*, etc.

Let's sum up. The banks are impervious, oblivious and agnostic to your credit history, creditworthiness, income and employment, and are willing to extend collateralized credit to you, as long a deposit is made. A no brainer, wouldn't you say? It sounds so easy on the surface that even my imaginary dog Smarty can do it. The devil is in the details. Read the fine prints before signing on the dotted line.

While at it, don't forget to read The Motley Fool's The Best Credit Card Ever at:

• www.fool.com
  

If you are flat broke, don't have any money, can't afford the $200 + to open a bank account and pay the fees, don't despair. There is a way to start earning and saving some money without incurring any out of pocket expenses. To find out how, read the following: Money: 10 Useful Web Sites.

For a list of Secured Cards, go to:

www.bankrate.com

So far we've explored 3 strategies. If the outcome, still, is not to your liking, let's examine strategy # 4.

4. Start a Business

Open a business through a legitimate entity, i.e. LLC, S or C Corporation, etc. (Please be advised that this not financial or legal advice. It's just information, general in nature. Should you decide to implement any of the outlined strategies, a wise course of action would be_and is_to consult with your legal or financial adviser for pertinent and specific information, relevant to your individual situation, before acting on any financial or legal information you've read.*) and apply for credit in the business' name_not in yours_(Do not mix apples and oranges!). As an officer (CEO, CFO, COO, UFO*) of the business entity, in addition to a salary, you are entitled to certain perks in the course of doing business. Use the salary earned from the business to start building your own credit history.

It is customary for banks and other financial institutions to offer credit or credit cards to newly formed business entities. In which case, a business would be a fool if it were to fail to take advantage of these offers. Indulge!

You might argue that it's tough to establish credit in your business' name, for it has no credit history of its own. Use strategies 1, 2 and/or 3 to start building credit in your business' name.

5. Peer-to-Peer Lending, or Social Lending

Peer to Peer Lending, also known as Person-to-Person Lending or Social Lending, turns the lending process on its head, by eliminating the proverbial "middleman" in the lend-borrow process, thereby bypassing the traditional lenders or financial institutions to make a loan or secure credit.

Traditional way. You make a FDIC insured low interest-bearing loan to a financial institution in the form of a deposit, the proceed of which is used (by the financial institution) to make loans (mortgages, credit cards, car loans, etc.) at a high interest rate. The spread (difference) between your low interest and the bank's high interest rates is the bank's profit.

Creative and novel approach. Lender and Borrower interact without the benefit of an intermediary (middleman), thereby reducing the cost of borrowing and enhancing or broadening the Lender's profit margin. Peer-to-Peer loans, unlike bank deposits, are not FDIC-insured.

The requirements vary. But the goal is to offer alternative sources of funding and make loans available to a broader segment of potential borrowers, who, otherwise, would not qualify for a traditional loan, without, all the while, losing sight of the means and method of repayment.

In a nutshell, in theory, that what Peer-to-Peer Lending is all about. However, in practice, are P-to-P rates competitive or usurious, terms more flexible, middlemen (intermediaries) eliminated, etc.?

The answers lie in your doing your homework. Research. Research. Research. Read the fine prints. Compare and contrast information and data. Check a business track record for any complaints or other issues. Failure to do so is at your own financial risk and peril.

Social Lending offers a variety of loans ranging from students loans, business loans, to banking for the poor, etc.

Here is a list of Peer-to-Peer Lenders (non-exhaustive, by all means):

Peer-to-Peer Education Loans

• www.custudentloans.org,
• www.greenote.com,
• www.lendingclub.com,
• www.loanio.com,
• www.prosper.com,
• www.virginmoney.com (Virgin Money is in the USA, UK, AUSTRALIA and SOUTH AFRICA),
• www.us.zopa.com (www.usafedcu.org) (Zopa is in the USA, UK, ITALY and JAPAN),
• www.qifang.cn,
  
• www.people2capital.com, and
  
• www.peer-lend.com (Loans Comparison Chart)
  

Microfinance Lending

• www.kiva.org,
• www.microplace.com, and
• www.gramenamerica.com
  

6. SBA Microloan Program

"The Microloan Program provides very small loans to start-up, newly established, or growing small business concerns". There are requirements with respect to Terms, Interest Rates, Fees, Collateral, Technical Assistance, and How to Apply. If the requirements can be met, the SBA Microloan Program could be a great source of credit. See list of nationwide SBA Accredited Microloan Providers at:

• www.sba.gov (click on highlighted SBA Microloan Intermediaries link to open PDF page list.)
  

7. Angel Investor

An Angel Investor provides seed capital in the form of personal loans or loan guarantees to start-ups, in exchange for a stake in the business. The following thriving companies, during their infancy, benefited from Angel Investing: Apple, Amazon, Body Shop, Google, and Starbucks. If you have a genial idea, along with a solid business plan, and are unable to get it off the ground due to lack of fund, a wonderful resource worth checking into is the Angel Investor Directory or, alternatively, the Angel Organizations Directory at:

• www.inc.com (Angel Investor Directory) or
• www.angelcapitalassociation.org (Angel Organizations Directory).
  

8. Piggyback

Piggybacking is using someone's stellar credit, as an authorized user or joint account holder, to establish or improve yours. Upside: You take advantage of someone's solidly established credit to build yours. Downside: If the stellar credit you are riding on becomes less than stellar, south goes your credit score. Most banks do not report authorized users. If you're planning on using that strategy to improve your credit standing, make sure it is reported to the credit bureaus. Piggybacking, as a credit score boosting technique, has been controversial lately due to abuse and unscrupulous use. According to FICO 08, Authorized User is still factored in into the credit scoring equation, but carries less weight in the overall credit scoring scheme. Be discerning.

9. Friends and Family

Sometimes Friends (or Foes) and Family are the piggy banks of first recourse, the banks of last resort for credit concerns. Regardless of the source of credit, the debt must be satisfied. The loan must be documented (in writing; for verba volant, scripta manent. Contract should include: Date, Name and Address, Loan Amount, Interest Rate*, Repayment Terms, etc. ), stipulated, formalized and notarized. Provided the parties abide by the terms of the agreement, the credit reporting agencies won't get wind of the transaction. On the other hand, failure to abide might result in court proceedings and a soiled credit reputation among Friends and Family: Insolvent Debtor.

Remember: Business, be it between and among Friends and Family, is still Business.

For a free sample of Loan Agreement or Promissory Note, go to:

• www.medlawplus.com
  

If you are not comfortable lending money to Friends and Family, have a third party, such as a Peer-to-Peer Lending Institution, do it on your behalf for a fee.

Consult with your Financial Advisor with respect to fees, interest and fiscal (tax) implications.

Don't burn your bridges, pay and honor your debt, and your Friends and Family Circle will be your best "Bank and/or Financial Institution", which you'll come back to again and again for bigger and better deals.

If all of the aforementioned strategies fail, obviously the credit red carpet has not been rolled out for you on this planet. Your next option? Move to another Planet (Mars, Neptune, Jupiter, etc.) and start your own credit business, whereby you can extend as much or little credit to you and yourself (LOL!). Sweet revenge! At last!

Financial Education

An investment in your financial education will pay lifetime dividends. If you care to invest a little time and money (time is money, so they say. Is money, then and therefore, time?) in your financial education, a generous list of resources is at your disposal.

♦Federal Reserve Education.- For free links to "instructional materials and tools that can increase your understanding of the Federal Reserve, economics and financial education":

• www.federalreserveeducation.org

♦Board of Governors of the Federal Reserve System.- For information on consumer credit, resources and tools:

• www.federalreserve.gov

♦Federal Trade Commission.- "Consumer facts: Need Credit or Insurance? Your Credit Score Helps Determine What You'll Pay", "How to Dispute Credit Report Errors", "Annual Credit Report Request Form" and Building a Better Credit Report:

• www.ftc.gov
  

As a credit consumer, you have rights and responsibilities, which you should educate yourself about; for an Educated Consumer is a Better Customer in general, and a Business' Best Costumer in particular, to paraphrase a slogan. For a Summary of “The Credit Card Accountability Responsibility and Disclosure Act”, The CARD Act of 2009, May 19, 2009:

• http://banking.senate.gov

In today's tough credit market, an excellent credit score (also known as FICO* score, BEACON Score (Equifax), EMPIRICA (TransUnion), Experian (Experian/Fair Isaac Risk Model) or NEXTGEN Score) matters. Why? Because it's_you guess it_sexy! (LOL!). Seriously, your credit score, among other things, determines the rate at which money is loaned to you. Good to excellent credit score: low rates (prime). Bad to average credit score: high rates (sub prime) or no loan at all. Your ability to shop for credit cards, personal loans, car loans, mortgages, rent an apartment, etc. or even land a decent job is affected. Bear in mind that your FICO score, although important, is not the only underlying factor influencing a Lender's credit-extending or declining decision. Amount of debt, employment, income, credit history, etc. and Lender's underwriting policy are also weighed in.

Here is a break down of the parameters influencing your FICO Score: 35% Payment History; 30% Amounts Owed; 15% Length of Credit History; 10% Types of Credit in Use (a healthy mix_credit cards, retail accounts, installment loans (i.e. car loans, boat loans, etc.), finance company accounts, mortgages, revolving and installment types accounts, etc. _is good); and 10% New Credit.

^{Payment History (35%) and Amounts Owed (30%), among other factors, make up a lion share of the FICO Scoring process. Hence the need to establish and maintain a Positive Payment History and lessen the Amounts Owed. Length of Credit History (15%): The earlier a Responsible Credit History is establish, the better. New Credit (10%) should be applied for as needed. Types of Credit in Use (10%) point to the need for a Diversified Credit Portfolio.}

Care to know the make-up or break down of your FICO score? Eager to understand your FICO score? Read the following booklet: Understanding Your FICO Score at:

• www.myfico.com
  

Monitor your credit by laddering the free annual credit reports. Get a report from Equifax on January 1st, one from Experian on May 1st, and another one from TransUnion on September 1st. If anything wrong were to have happened to your credit score, record or file, if you miss it on either one report, you'll catch it on subsequent laddered reports.( Caveat: Credit information, to some degree, varies from one credit reporting agency to another.)

• www.annualcreditreport.com or call 877-322-8228.
  

The tres(3) amigos web sites, as far as credit monitoring and credit reports are concerned:

• www.equifax.com (1-800-685-1111),

• www.experian.com (1-888-397-3742), and

• www.transunion.com (1-800-916-8800)
  

The Rule of 72

Are you familiar with the Rule of 72? If not, it's about time you get acquainted with it. The Rule of 72 simply states: If you want to know how long (years) is required to double your money at any given interest rate (annually compounded), divide the interest rate into 72 (or divide 72 by the interest rate). It's important to understand this rule, for that's the rule used by lenders to enrich themselves and impoverish you in the process. This rule, once understood, you are in a position to turn the table on those financial leeches.For more details on The Rule of 72 with calculator, visit Moneychimp's web site:

• www.moneychimp.com

According to Bankrate.com, the current highest Money Market and Saving Account Rates (rates are subject to change without notice) range from 0.10 to 1.83, Rate Post Intro., which is the rate at which you loan money to your financial institution.

According to the same Bankrate.com, the current Low Interest Cards Rates (rates are subject to change without notice) range from 7.25% to 18.99%, Regular APR, which is the rate at which your are loaned money to.

Here is your homework: Based on The Rule of 72 and the spread above, determine how long it will take your lender to double its money vs your money (let me guess: eternity!). If , at that rate, you manage to double your money in your lifetime, how about inflation rate? After everything is said and done (computed), the rate of return on your money might be a negative one (do the math).

Armed with that information, you will, from now on, vow to use your credit cards_ or any credit for that matter_ as investment tools (assets), as opposed to expenditure vehicles (liabilities). Your lending institutions will be viewed not as money leeches, but as "Respectable Business Partners". Leverage credit or your lenders for a change to enrich yourself, as opposed to being leveraged all the time to your financial detriment.

Did you you know that most people use credit to open a business or invest (after the I's are dotted, the T's crossed, and due diligence is done, of course*), make a profit, pay back the lender, and pocket the rest? That's a win-win financial strategy.

On the other end of the credit spectrum, did you also know that most people use credit to go on a "Shopping Spree" or bite more than their budget (learn how to manage your budget with free accounting software: How To Get Free Accounting Software) can chew, their financial inability to repay the loan results in bankruptcy of both_ lenders and borrowers? That's a lose-lose financial strategy.

The lesson? Use credit wisely, intelligently and responsibly!

Despite one's best effort to manage one's credit intelligently, one does, however, run into financial trouble from time to time, due to circumstances beyond one's control, in which case professional advice should be sought. If you are experiencing financial hardship, before things get out of hand, seek non-profit or low cost debt advice from The National Foundation for Credit Counseling at:

• www.debtadvice.org or
• www.nfcc.org
  

Compound Interest

According to Albert Einstein, allegedly, Compound Interest is the greatest mathematical discovery of all time, and the most powerful force of the universe.

Using the preceding statement as a frame of reference, if a penny were to double every day, for the next 30 days, how much money would it amount to?

The moral of the story: The earlier you start saving, the more assets you'll accumulate, thereby making you more creditworthy in the Lender's eyes with respect to collateral.

Want to instill in your kid(s) the value and potency of compounded saving? Why not start a Double-A-Penny-A-Day challenge, using funds from recycled aluminum cans, plastic bottles, glass, etc. In so doing, not only will you save_not kill_ two birds with one aluminum can, one plastic bottle, etc. but also protect the environment and start a College Saving Fund. According to Earth911, "Each year the aluminum industry pays out $800 million dollars for aluminum cans". It's about time your kids get their fair share of that loot. To find recycling centers near you, go to:

• www.earth911.com
  

In the same vein, if you and your kid(s) care for the formula to solve the penny-doubling problem, check out:

• www.mathforum.org
  

Credit is a double-edged sword, which can be used to enrich or impoverish oneself, to one's financial advantage or detriment. Credit, in the proper hand, when used judiciously and with discernment, is a great wealth-building tool. Credit-wise, you can either enslave or set yourself free financially, not both! The choice is yours.

With respect to credit, make it a mutually beneficial, a win-win relationship for both Lender and Borrower. A solvent Borrower enables the Lender to cast a wider credit net. An insolvent Debtor cripples and, eventually or ultimately, bankrupts the Creditor.

Now that you know How and Where to get credit, if you can't get it, you have no one to blame but blame itself! (LOL!)

You certainly have ideas, opinions and expertise. Why not join Hubpages to share them with the world and potentially earn some $$$?

Join Hubpages now. Sign up here.

______________________________________________________________________

*Once again, content is not to be construed as legal or financial advice, and does not seek to dispense same. It's for informational purposes only. Financial decisions are personal and based on individual situations. Consult with a financial advisor/professional before making any financial decisions. Content is not liable for financial decisions/actions.

* FICO : Fair Isaac Corporation.

* FICO score determines one's creditworthiness based on payment punctuality, percentage of credit limit used, length of credit history and types of credit used. FICO score ranges from 300 to 850. The higher the score, the better on the creditworthiness spectrum, along with other additional factors. A score north of 700 is, nowadays, preferred.

* To determine the Loan Interest Rate, see the IRS' Index of Applicable Federal Rates as a reference point.

-- -------------------------------------------------------------------------------------------------

^{*Hub's content is not financial advice and should not be construed as such. It is for informational purposes only. Every effort has been made to convey accurate information. Author cannot be held liable or responsible for inaccuracies, if any. The advice and expertise of a financial professional/expert should be sought when warranted, or prior to acting on any financial information. Readers are advised to do their own due diligence.}

^{*VISA, MasterCards, American Express and Discover are respective registered trademarks of VISA USA, MASTERCARD INTERNATIONAL, INC., American Express Company and Discover Financial Services, Inc.}

^{*UFO: Unidentified Flying Officer (LOL!).}

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