Are you experiencing loan rejections due to a ‘settled’ status on your CIBIL report? As always, the CIBIL report plays a crucial role in evaluating loan applications, but a remark like ‘Settled/ Post (WO) settled’ can severely impact your creditworthiness. Bank managers may simply dismiss your application if they find any settled status on your CIBIL report. As a borrower, your first concern would be to rectify your CIBIL. However, in this situation, many questions may arise in your mind: ‘Can I remove settled loan from CIBIL report completely? What would be the best approach to remove the negative remark from my credit report?’
Don’t worry! In this article, you will get a complete understanding of reporting settled status on an individual’s credit report and the possible solutions to eliminate it permanently.
What is loan settlement and how does it impact your CIBIL score?
Before going into a deep discussion, let’s understand, what is debt settlement.
Typically, loan settlement is an agreement between the leader and the borrower, wherein the borrower can close his loan by paying less than the entire outstanding amount, and the lender waives off the remaining portion of the loan.
Usually, when an individual misses their loan EMIs for six consecutive months or more due to financial hardship (such as job loss or medical emergencies), the lender may consider their situation and offer them a settlement.
However, if the borrower accepts the lender’s offer and closes his loan under compromise settlement; simultaneously, the lender updates the loan status as ‘Settled’ to his credit report.
It’s important to note that settling a loan may reduce an individual’s financial obligations, but it has a negative impact on their CIBIL report. If there is a settled status on your CIBIL report, it can significantly lower your CIBIL score.
Moreover, you may become ineligible for further loans as most lenders perceive you as a risky borrower and reject your loan applications. To overcome such a difficult situation, you should take immediate action to remove the settlement from your CIBIL report.
Can you remove Settled loan from CIBIL Report?
In terms of rectifying your CIBIL report, a confusion may arise in your mind that “If there is a settled loan in my CIBIL, is it possible to remove the entire loan account from my credit report?” In this context, two possibilities may arise:
1) The settled loan is completely unknown to you, and
2) You had genuinely settled one of your prior loan accounts.
If you notice that the particular settled loan account is reported mistakenly in your CIBIL report and it does not belong to you; only in such cases, you can remove the entire loan account from your CIBIL report.
Otherwise, if you genuinely settled the particular loan account in past; in those cases, the loan account will remain in your CIBIL report for a lifetime. You can only remove the settled status from the particular loan account.
For this purpose, you have to pay the remaining (outstanding) balance toward your settled loan. After that only, the lender will change the account status from “settled” to “Blank”.
However, we have discussed the whole rectification process for both separate cases. Follow the instructions according to your concern.
Case 1: The settled loan is completely unknown to you:
Let’s imagine a situation, where you have applied for a loan, but your loan application gets rejected to some delinquencies in your CIBIL report. On investigation, the bank manager informed you that there is a settled loan in your CIBIL report.
But when you check your CIBIL report, you notice that the particular account is completely unknown to you. Moreover, you are getting penalized due to someone else’s fault. It sounds pathetic, right? Actually, this kind of situation arises due to a data mixing error on the borrower’s CIBIL report.
As a leading credit report company in India, TransUnion CIBIL manages a huge database for each individual borrower. When two customers have similarities in their name, DOB, addresses, and identification details, then such kind of data mixing error happens.
In this case, your identification details may be very close to a loan defaulter (Who had settled his loan), and due to data mixing, his settled loan is reported in your CIBIL report. However, you can remove the entire loan account by raising an online dispute in CIBIL as the default account “Does not belong to me”.
You can also write a complaint letter in CIBIL along with your KYCs & CIBIL report. After getting confirmation from the respective bank, CIBIL will remove the unknown settled loan account from your CIBIL report.
Case 2: You genuinely settled one of your prior loan accounts.
As we discussed earlier, if you genuinely settled one of your prior loan accounts, you can remove only the settled remark from the particular loan account. In fact, you have to pay further to the lender to rectify your CIBIL.
There is a myth regarding the settlement record in a credit report; which states that the settled status will be removed from CIBIL automatically after 7 years from the account closing date. Although you can find numerous articles on the internet, it’s not true, especially for the Indian citizen.
As we all know TransUnion, Experian, and Equifax also operate their business around the world. In the USA, all these credit bureaus removed the borrower records from their credit report after 7 years from the date of first account delinquency. Actually, they removed credit data of their consumer after a certain period. However, there are no provisions or guidelines in India for the same.
In India, if you made a compromise settlement in any of your prior loan accounts, the “Settled” remark will remain in your credit report for life long, until unless you clear the remaining (Outstanding) balance toward your loan account and rectify your CIBIL report accordingly.
However, the whole rectification process is not too easy. In most cases, lenders may refuse to accept any further payment as your loan account has been already closed. But you can overcome all those difficulties by following these steps.
- Contact with the lender:
The first and foremost step will be contacting the respective bank and collecting the demand letter from them. For that purpose, you can send an email, call on their customer service, or visit the loan-availing branch and ask them to share the remaining (outstanding) amount that you need to pay further to remove the settled status.
Usually, all banks maintain a separate pull/ suspense account to collect such kind of payment and rectify their customers’ credit reports.
In case, the bank manager refuses to accept any further payment, you should email their grievance/ Nodal desk or visit the regional office. After investigation from their end, the bank will provide you with the exact amount details and payment methods. Be noted, collect all these details in written format.
- Pay the remaining (outstanding) balance & collect NOC:
After collecting the payment details, pay the same amount as per their instructions. And, don’t forget to collect a No Dues Certificate against the full & final payment. Actually, all this evidence will be required to remove settled status from CIBIL report.
- Raise dispute in CIBIL:
Now, to remove settled status from CIBIL report, you have to raise an online dispute in CIBIL. First, login to your CIBIL portal and go to the dispute section. In the dispute form, change the “Settled/ Post (WO) Settled” status by “Clear Exiting Status”.
If there is any Written-off Amount or settled Amounts mentioned in your CIBIL report, make all those details zero and submit the dispute. After the successful submission, a Dispute ID will be generated.
Additionally, write a complaint in CIBIL and elaborate all the details in the letter. And, attach your KYCs, the latest CIBIL report, and the full & final payment receipt, the NOC. By submitting the complaint letter in CIBIL, you will get a Service Request Number.
TransUnion CIBIL will forward your concern to the respective lending institute for to verify the loan status. Based on their investigation, CIBIL will notify the dispute status through your email, and check your emails to get any updates.
- Sent a request to the lender for the required correction:
In addition to this, you can also send a separate email to the concerned lender for a faster resolution. And, take the required actions based on their responses. You have to maintain a continuous follow-up with both CIBIL and the bank until the required correction is made. That’s all! I hope this information helps you to remove settled loan from CIBIL report.
Important Note:
If you have taken a loan from any PSU (Public Sector Undertaking) bank and due to non-payment, the account became written-off and then you settled the loan. Under such circumstances, you may notice the “Written-off” status in your CIBIL report. To remove the written-off status, you have to clear the unpaid due amount and follow similar methods to rectify your CIBIL.
