Impact Of "Settled" Status On Your CIBIL Score

Blog Post10/19/2018
Credit Myths

Did you know that a "Settled" status on your CIBIL Report can affect your access to credit.

Nishant is a mid-level executive at a leading IT firm with three years of work experience. Now, he is keen to pursue his MBA at a renowned B-school. Nishant is no stranger to credit; he has used credit cards before, and taken a consumer durable loan to purchase an expensive, high-end smartphone. Three years ago, he had even taken a personal loan for a holiday to Europe.

Sifting through the best interest rates available on education loans, he finally selected one to apply to. However, within a few hours he was informed that the loan has been rejected due to a “settled” status reflecting in his CIBIL Report under Account Information.

Unaware of the actual meaning of “settled” on his CIBIL Report, Nishant is confused — “settled” has a positive connotation, doesn’t it? After a conversation with the lender, he finally understood what had transpired.

What happened?

When Nishant had taken a personal loan for his European holiday, he had been paying the monthly installments on time. Unfortunately, towards the end of the repayment period, he had a personal emergency and couldn’t make payments. As he could not repay the full amount, the bank agreed to a certain settlement amount which he had paid.

However, this was lesser than the complete amount payable.

Due to this, the bank had reported this loan as “settled”. If he had made the entire payment, the loan would have been reported as “closed”. The “settled” status on his CIBIL Report was the reason why his education loan application had been rejected.

The solution?

Nishant was advised to pay the remaining (outstanding) amount on his personal loan. After doing so, he procured the NOC (No Objection Certificate) from the bank and raised a dispute on CIBIL’s website. The credit bureau was able to confirm this development with the bank and changed the status from “settled” to “closed” within 30 days.

Your past credit behavior has a long-lasting impact. Lenders view “settled” as risky, primarily because if you haven’t met your repayment obligation before, there are chances that you might do this again.

Instead, it is advisable to be proactively cautious:

  1. Apply for credit cautiously, and avoid multiple credit cards or loans unless you can manage it responsibly.
  2. Pay the entire amount due on time, every time.
  3. Continuously monitor your CIBIL Score and Report to identify any information that can negatively impact your chances of getting loans in future, especially in an emergency.

 

However, if you have been in a sticky situation and could not repay the full loan amount, you may have already settled this with your bank. Now, it is imperative to pay off the entire balance amount as soon as possible, and reach out to your bank to remove the “settled” status. Your loan-readiness and access to credit in the future depends on it.

Disclaimer: The information posted on this blog (Information) is prepared by TransUnion CIBIL Limited (TU CIBIL). This Information is for generic informational purposes only and is meant for consumer education and awareness about credit scores, credit history and credit reporting. The Information posted on the blog does not constitute credit advice and the user will need to consider the same and take independent informed decisions . No part of this Information may be quoted out of context, distorted ,distributed, published and/ or reproduced in any form and manner whatsoever. Consumers are advised that the Credit Information Reports (CIRs) prepared by TU CIBIL are based on collation of information, substantially, provided by credit institutions who are members with TU CIBIL. TU CIBIL is not responsible and /or liable for errors and/or omissions caused by inaccurate or inadequate information submitted to it by credit institutions. TU CIBIL does not guarantee the adequacy or completeness of the Information and/or its suitability for any specific purpose nor is TU CIBIL responsible for any access or reliance on the Information. TU CIBIL expressly disclaims all such liability. Further, this Information is based on the data available with TU CIBIL at the time of publication and therefore may not be up-to-date.