Susan asks: I went through a modern day divorce last year where we were dividing more liabilities than debt. Also, because I didn't want my ex-spouse running up a joint credit card, we closed the two we had, which both had high balances. We also had to sell our house in a short sale. Been a banner year! What is my best path of rebuilding my credit over the next few years?
Very smart of you to close the joint credit cards you shared with your husband. While doing so may have actually dinged your credit score – due to loss of available credit – I think you’re better off in the long run by trusting your instincts and eliminating the risk of your ex charging up a storm on the cards and sinking you further into debt.
Your biggest hurdle now is rebuilding credit after the short sale, which can result in as much as a 200-point drop in your credit score.
Now, while record of the short sale remains on your credit report for seven to 10 years, the good news is that the impact on your score lessens each year, according to Anthony Sprauve, of myFICO, the consumer division of FICO, the widely-used credit-scoring system. “The lesson for anyone is that if you stumble, the minute you begin good habits again, you start to see improvement.”
The most critical step toward an improved score is aggressively paying down your credit-card balances, in addition to addressing all your incoming bills on time, every time. Set up automatic payments and pay far more than the minimum each pay period if you hope for a steady recovery. And while it’s unlikely you will be approved new lines of credit at the moment, resist the urge to even apply since that’ll result in “hard inquiries” which can further lower your score. Following these steps should lead to noticeable improvements in your credit score in six months, says Sprauve. But patience is key. A full recovery could take anywhere from three to seven years.
Talye asks: I'm 40 years old and currently unemployed. I do not have medical insurance at this time. I suffer from sleep apnea and I may decide to [get] surgery next year  if the currently over-the-counter medicine I'm using doesn't help. Considering the issue of pre-existing conditions, am I eligible to obtain medical insurance? I'm a U.S. citizen but really don't understand how medical insurance works both in the private and public sector?
I’m sorry to hear about your condition and hope you receive treatment soon. You may still be able to obtain an individual health plan – but at a higher cost. Unfortunately, at present, pre-existing conditions like sleep apnea can impact your insurance rating and premium from private insurers, according to Amy Danise of Insure.com. Each insurer has its own underwriting guidelines and depending on those guidelines, you’ll either pay a higher rate, get limited coverage or be denied coverage altogether.
That said, you have the right to appeal a health insurer’s decision if you’re unsatisfied, according to the American Sleep Apnea Association, with the help of your insurance agent and physician. And note that if you properly treat your sleep apnea – and get the illness under control – prior to applying for health insurance, your pre-existing condition may no longer be a variable in calculating your premium.
Keep in mind that starting in 2014, under the Affordable Care Act, health-care providers will no longer be allowed to deny individuals coverage based on pre-existing conditions. If you’re refused coverage between now and then – and don’t feel like battling it out with insurance companies – Danise recommends checking out the Pre-existing Condition Insurance Plan (PCIP). This government program was established in 2010 to assist people like you who are U.S. citizens, have been without insurance for at least six months and run the risk of being denied coverage due to a pre-existing condition. It covers hospital care, prescription drugs and treatments to pre-existing conditions. Each plan carries varying levels of premiums, deductibles and co-pays. The most you'll pay for benefits in 2012 (not including your monthly premium), according to the program’s site, is $7,000.
The Department of Health and Human Services serves the PCIP in about 24 states, while the other states run it on their own. In these states, application procedures, costs and benefits may vary. If you live on one of these states that runs its own PCIP, you can find premium rates here.
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