What is the impact of the ‘Settled’ status on your CIBIL report?

0
42

The ‘settled’ status on an individual’s CIBIL score against a loan amount will negatively impact their credit score

The credit report will reflect that they had settled for lesser than the exact amount they owed to the financial institution. A situation like this will only lead to a negative effect on their credit score. 

In India, all records of credit-related activities are maintained by India’s credit information company, the Credit Information Bureau (India) Limited (CIBIL). 

‘Settled’ status: meaning

The term settled is mentioned on credit cards and loans when borrowers fail to repay the total sum of borrowed funds within the repayment tenure. 

In a situation as such, the lending party negotiates with the borrower and agrees on alternative repayment terms. In most cases, lenders have to accept whatever amount the borrower offers as the settlement amount. 

‘Settled’ status: impact on CIBIL score

Each time a borrower approaches any lender or financial institution for credit their CIBIL score is crucially taken into consideration. 

A ‘settled’ status will not only negatively impact one’s CIBIL score but will also be reflected on the credit report for as long as 7 years from the settlement date.

Most lenders and financial institutions consider a borrower’s credit score to determine their creditworthiness. Thus having a ‘settled’ status in one’s report might not convince the lender to give them the credit amount. 

Apart from this, there is a lingering confusion between a ‘settled’ status and a ‘closed’ status among borrowers. 

‘Settled’ status and ‘Closed’ status: difference

Refer to the list of differences as mentioned below:

  • A ‘settled’ status negatively impacts an individual’s CIBIL score/ credit score, and a ‘closed’ status positively impacts one’s CIBIL score.
  • When a borrower repays a part of his/ her dues during the repayment completion tenure, it is labelled as ‘settled’. On the other hand, when a borrower successfully pays off his/ her with the end of their repayment tenure, it is labelled as ‘closed’. 
  • In the case of ‘settled’ status, the lending party has to bear the losses. Under a ‘closed’ status, neither party is at a loss.
  • A credit report inscribed with ‘settled’ status poses as a hindrance for all future loan approvals for as long as 7 years. Whereas a credit report with a ‘closed’ status might convince lenders to offer an affordable rate of interest against borrowed funds. 

Furthermore, individuals should also be aware of the details required to check one’s credit score. 

Details required to check credit score

The following details of an individual are required to check their credit score:

  • Full name
  • Contact details
  • Email address
  • Birth date
  • Residential address
  • Type of employment, salaried or self-employed
  • Monthly income of salaried individuals
  • The annual turnover for self-employed individuals
  • Permanent Account Number

Furthermore, many a time, individuals noticed discrepancies in their credit reports. For example, incorrect email addresses, transaction details, or any sort of spelling issues. In such cases, the involved individuals should apply for a CIBIL dispute. The application process is very simple; they simply need to visit the official CIBIL website and fill up the CIBIL dispute form online. 

Moreover, you can check your credit score by visiting the official website of Bajaj MARKETS. All you need to do is go to the CIBIL score section and fill up all details as asked for. Thereafter, click on the ‘Get OTP’ section. You will receive an OTP at your registered mobile number; enter the OTP to proceed further. Once all details are verified, you will be able to view their credit score. 

In conclusion, repaying a loan is a big responsibility that not many can afford. Thus, when applying for borrowed funds, it is recommended that you consider your financial stability and then choose the loan amount and repayment tenure. Failing which, you will only get negatively impacted with ‘settled’ status in your credit report. This will also hamper your credit score and the effects of which will last for as long as 7 years.