6 Steps to Effectively Lower Your IRAS Score Without a Credit Repair Agency In 2024

In the competitive landscape of alternative business lending, your Internal Risk Analysis Score (IRAS) plays a pivotal role in determining the terms, rates, and approval amounts you receive. A lower IRAS score signifies lower risk to lenders, translating to more favorable lending conditions for your business. The good news? You don’t need to rely on credit repair agencies to improve your IRAS. By taking proactive steps, you can effectively lower your score and enhance your borrowing potential. Here are six actionable strategies to help you achieve just that.

Step 1: Build and Maintain a Strong Payment History

Your payment history is a cornerstone of your IRAS score. Lenders scrutinize your ability to make timely payments on business advances, viewing consistent, on-time payments as a sign of financial responsibility and reliability.

How to Improve:

• Automate Payments: Set up automatic payments to ensure you never miss a due date.

• Prioritize Debt Repayment: Focus on paying down existing debts before taking on new ones.

• Monitor Your Accounts: Regularly review your payment schedules and account statements to stay on top of obligations.

Benefits:

• Demonstrates financial discipline.

• Reduces the risk of default.

• Enhances your credibility with lenders.

Step 2: Avoid Excessive Stacking of Business Advances

Less is More

Taking on multiple business advances simultaneously can signal to lenders that you’re over-leveraged, increasing your perceived risk. When lenders see that you have several positions, they worry about your ability to manage multiple payments, potentially leading to higher interest rates or reduced loan amounts.

How to Improve:

• Limit New Applications: Apply for business advances only when necessary.

• Consolidate Loans: Consider consolidating existing loans to manage payments more effectively.

• Assess Your Needs: Carefully evaluate how much funding your business truly requires before seeking additional advances.

Benefits:

• Lowers perceived financial risk.

• Simplifies debt management.

• Potentially improves loan terms.

Step 3: Refrain from Excessive Shopping for Approval Offers

Think Before You Apply

Every time you submit your file to a lender, an IRAS pull is performed. Multiple inquiries in a short period can signal financial distress, causing your IRAS score to rise. This can make you appear as a high-risk borrower, deterring lenders from offering favorable terms.

How to Improve:

• Research Thoroughly: Identify the most suitable lenders for your needs before applying.

• Space Out Applications: If you need to apply to multiple lenders, do so over an extended period.

• Use Pre-Qualification Tools: Many lenders offer pre-qualification processes that don’t impact your IRAS score.

Benefits:

• Maintains a stable IRAS score.

• Increases the likelihood of approval.

• Enhances your bargaining power with lenders.

Step 4: Opt for Partial Loan Utilization

Smart Borrowing Practices

Accepting the maximum amount approved for a loan can unnecessarily increase your IRAS score. By borrowing only a portion of the approved amount—ideally around 75%—you demonstrate prudent financial management and reduce your overall risk profile.

How to Improve:

• Assess Your Needs: Determine the exact amount your business requires and avoid overborrowing.

• Leave Buffer Funds: Maintaining a buffer can provide financial flexibility and reduce pressure on cash flows.

• Plan Repayments: Smaller loan amounts are easier to manage and repay promptly.

Benefits:

• Lowers your overall debt burden.

• Enhances your IRAS score.

• Provides greater financial flexibility.

Step 5: Keep Accounts Receivable (A/R) Reports Up to Date

Efficient Cash Flow Management

Timely and accurate A/R reports are crucial for maintaining a healthy IRAS score. Delayed or inaccurate payments can indicate cash flow problems, raising red flags for lenders about your business’s financial health.

How to Improve:

• Implement Invoicing Systems: Use reliable invoicing software to track and manage receivables efficiently.

• Follow Up Promptly: Regularly follow up on outstanding invoices to ensure timely payments.

• Reconcile Accounts: Periodically reconcile your A/R reports to identify and address discrepancies.

Benefits:

• Ensures steady cash flow.

• Reduces the risk of overdue payments.

• Strengthens your financial standing with lenders.

Step 6: Stay Current with Mortgage and Credit Card Payments

Comprehensive Financial Responsibility

Your IRAS score isn’t limited to business advances alone. Mortgage and credit card payments are also factored into your overall risk assessment. Missing payments or carrying high balances can negatively impact your score, portraying you as a higher-risk borrower.

How to Improve:

• Budget Effectively: Allocate funds to cover all your financial obligations, including personal and business debts.

• Reduce Credit Utilization: Keep your credit card balances low relative to your credit limits.

• Set Reminders: Use calendar alerts or financial management apps to remind you of upcoming payment due dates.

Benefits:

• Enhances your overall creditworthiness.

• Prevents negative marks on your credit history.

• Improves your attractiveness to lenders.

Conclusion

Lowering your IRAS score is a strategic process that requires consistent effort and disciplined financial management. By building a robust payment history, avoiding excessive debt stacking, being cautious with loan applications, practicing smart borrowing, maintaining up-to-date A/R reports, and staying current with all your financial obligations, you can significantly enhance your IRAS score. These proactive steps not only improve your standing with alternative business lenders but also set your business on a path to sustainable financial health. Take control of your IRAS score today and unlock better lending opportunities for your business’s future.