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What does a 'Settled' status in your CIBIL report mean?

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Most people would have a hard time understanding whether a 'settled' status on your CIBIL report is a positive or negative. To understand this situation better, let us take an example. A mid-level executive in a reputed marketing firm has applied for a loan to pay the fees for his MBA from a private B-school. His work experience is three years and he even has credit history. He has repaid a consumer durable loan and has used credit cards. He also has a personal loan for a Europe holiday to his name.

However, when he applied for a loan, he was informed that his application had been rejected. The reason cited was the ‘settled’ status reflected in his CIBIL report. If you are confused about what that means, read on to find out.

What does it imply?

The ‘settled’ status essentially means that one of the loans taken by him was not repaid in full and the Bank agreed to a certain settlement amount instead which was paid. As this reflects an inability to pay the complete amount on time, it is a negative status. It is possible that he would have been paying regular monthly installments for his personal loan for the European holiday. A personal emergency caused him to miss installments towards the end of the period.

The crux of the matter is that the bank has agreed to accept a lower amount than the required and reported this loan as ‘settled’. Had the bank received the entire amount, they would have reported the loan as ‘closed’. The difference between the ‘settled’ and ‘closed’ status could become the reason for rejection of an education loan.

The Next Step

The good news is that the ‘settled’ status is not permanent. You can pay the remaining or outstanding amount of your loan and procure an NOC (No Objection Certificate) from the Bank. This allows you to raise a dispute on CIBIL’s website. Once the credit bureau confirms this development with the Bank, status is changed from 'settled' to “closed” within 30 days.

While the change takes place after raising a dispute, your credit history does have a long-lasting impact. A 'settled' puts you in the risky bracket for loans because lenders read your inability to meet your repayment obligations in the past as a sign that it might happen again in the future.

How can you avoid a negative impact on your credit score?

  • Apply for credit and multiple credit cards or loans only when necessary. They may reduce your ability to manage them in a timely manner.

  • The basic rule is to pay the entire amount without fail within the due date.

  • Monitor your CIBIL Score and Report to identify any information that can reduce your chances of getting loans in an emergency.

If you have been in an emergency which prevented you from repaying the entire amount of your loan, you may want to repay the balance when you are in a better position. The bank may have settled the loan but the negative impact on your CIBIL score will be long-lasting. It is advisable to pay off the entire balance amount as soon as possible and then request your bank to remove the ‘settled’ status.

Click here to check your latest CIBIL Score for free.


Disclaimer: Articles published on the website are merely indicative and suggestive in nature and do not amount to solicitation. The contents do not guarantee the desired returns and/or results. Reader is advised to exercise discretion and consult independent advisors for achieving desired result. Visitors to this blog/ website w.r.t products & services offered by RBL Bank Limited herein, shall ensure that the comments / feedback posted shall be restricted to the contents published herein and shall not contain such language that may be un-parliamentary or against any religion, caste, section of society, political view etc. While our endeavor is to publish the comments that are submitted, however, all comments/feedback shall be subject to internal review by RBL Bank Limited. We do not guarantee that the comments that are submitted will be published.

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