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Help! My policy's with AIG

Some of you have asked Gerri about difficult choices regarding credit card debt, 401(k) contributions and insurance with AIG. Here are her answers.

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By Gerri Willis, CNN personal finance editor

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For more information on managing your largest investment, check out Gerri Willis' 'Home Rich,' now in bookstores.

NEW YORK (CNNMoney.com) -- Question 1. If you have no credit card debt and have closed your credit card accounts, how can this hurt your credit score? - Nathan

First, how long you've used your cards accounts for about 15% of your FICO score. The longer history you have managing a card, the better your score will be.

Secondly, your FICO score also calculates how much credit you have in relation to your debt. By closing a card, you wipe away some of that available credit and that makes your debt look bigger - if you do carry debt at some point.

Some issuers are even closing down your credit cards if you don't use them often enough. So be sure to spread around your purchases on different cards so you avoid this situation.

Question 2. My company just announced they are suspending their 401(k) contribution. Because of this and the current economic situation, should I stop contributing to my 401K? I have only been in for two years and have about $9,000 in it. - Tom

Just because your employer cut your match, you should still contribute to your 401(k) if you can.

Remember, your contributions are still tax-advantaged and if you have at least ten or more years until you retire, the stock market is a good place to be.

Stocks returned no less than 7.2% and as much as 15.6% annually in the decade following a long-term decline. That's according to money management firm Leuthold Group.

Question 3. If AIG does go out of business, what would happen to our life insurance policy? I would like to let AIG know how unhappy I am with their business practices. But I understand that the person opening the mail with my premium and cranky note won't really care, and can't really do anything. - Mary

Well, you're thinking is on the money. But as far as the safety of your life insurance policies are concerned, you shouldn't be worried. That's because if AIG sold off its units, insurance policies would be picked up by the company that buys it.

In addition, insurance policies would be covered by state guaranty associations.

Plus, if you switch out of AIG, you could be on the hook for cancellation penalties. And when you go to get a new life insurance policy, the rates could be higher since you're older now than when you first got your policy. To top of page

Gerri's Mailbox: Got questions about your money? We want to hear them! Send an e-mail,we'll answer questions on CNN, Headline News and CNNMoney.com.
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