Struggling each month to pay your bills can quickly take a toll. You may notice the pressure affecting many areas of your life, including your job, your relationships and your health. You know there are alternatives that could set you on a path to debt relief, but too many uncertainties keep you from taking the first step.

One of the most common factors that prevents people like you from investigating the possibility of filing for bankruptcy is the fear that the process will ruin their credit ratings. After all, even if you resolve to avoid getting back into debt, you will certainly need to purchase a car or home at some point. Even a used car may require a loan, and renting an apartment often involves a credit check. So, how does bankruptcy truly affect your credit score?

Your credit score

When you fall behind on your debts, your creditors may report your default to one or all of the three main credit-reporting agencies, Equifax, Experian or Trans Union. The Fair Isaac Company then uses the information from these agencies to calculate a score using a secret algorithm that considers the following factors:

• The kinds of credit open to you
• How recently you obtained new credit
• How old your credit history is
• The total amount you owe to creditors
• Your history of late payments and defaults

The result is your FICO score, which can range from 300 to 850 and may be different for each reporting agency. Anything lower than 500 is considered a risk to creditors.

A hopeful future

Your payment history and the amount you owe make up more than half of the factors in your FICO score. Chances are, if you are considering bankruptcy, you are already in default on more than one debt or have skipped payments often enough that your credit score is already damaged. You may have overextended your credit or opened new accounts, dropping your score further.

While it is true that a bankruptcy will hurt your credit rating, it is not likely to do much damage to a score that is already low. The most serious consequence is that the bankruptcy will remain on your credit report as discharged debts for up to ten years. However, the sooner you begin the bankruptcy process, the faster you can begin to repair the damage to your credit.

As each year of financial success passes, the bankruptcy slips further into your history and becomes less of an issue to potential creditors. However, you may still have questions about the options for debt relief and the realistic expectations you can have. Seeking answers from a compassionate New York attorney may be the first step to financial freedom.