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

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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.