Often, borrowers choose to settle or default on a loan if they are facing difficulties repaying the loan. It can have drastic effects on their credit score and damage their financial future.
In this article, we explore how “written off” and “settled” statuses on your CIBIL report affect your credit score, and how you can clear them.
What Is the Written Off Status In Your CIBIL Report?
The term “Written off” on a CIBIL report signifies that the lender could not retrieve the loan amount from the borrower, despite multiple tries, and had written off the dues.
The lender then sends this information to their reporting credit bureau, which updates the credit report with the “Written Off” status.
How Does Written Off Status Impact CIBIL Score?
A “Written-Off” remark on your credit report will reduce your CIBIL score drastically. It will hurt your chances of securing any form of credit in the future. Moreover, it takes a long time to remove the status from your CIBIL report.
How To Remove Written Off From CIBIL?
It is possible to remove the “written off” status from your CIBIL report, even though it is a time-consuming and challenging process. Here is how to clear written off in CIBIL.
Step 1: Approach the lender to find out the amount you owe
Step 2: Negotiate with the lender on how you will be able to pay back the amount
Step 3: Once the loan is settled or cleared, obtain a “No Dues Certificate” or a letter stating the dues have been paid off from the lender
Step 4: Additionally, request the lender to update the latest loan status with the credit bureau
Step 5: You can also directly approach CIBIl and raise a dispute to clear the “Written off” status
Step 6: Submit all the necessary documents as proof of your loan clearance
Step 7: Follow the request with CIBIL until your CIBIL report is updated and the “Written-off” status is removed
CIBIL does not have the authority to change the status until the lender updates the bureau with relevant information. Hence, approach the lender first and secure the necessary documents to support your dispute.
What Is Settlement In CIBIL?
orrowers often face unprecedented challenges while repaying the loan. It can be due to loss of income, accidents, illness, or any other unavoidable circ*mstances.
In such cases, they can re-negotiate the terms of the loan agreement with the lender or “settle” the loan if the lender agrees.
Settlement of the loan involves the borrower paying only a part of the loan and the lender forgives the rest of the amount due. This leads to the lender updating the loan status as “Settled”.
How Does Settled Status Affect CIBIL Score?
The vast majority of borrowers are unaware of how a “Settled” status affects CIBIL score. While settling the loan might give you an out at the moment, it ruins your credit score and further makes it hard to secure credit at desirable terms.
The “Settled” status stays on your credit report for as long as 7 years. If you decide to take another loan during this period, a potential lender might not consider your application with a “settled” status.
Hence, as a borrower, you must anticipate the drastic effects settling can have, if you choose to do so.
How To Remove Settled Status From CIBIL?
The only way to remove a settled status from your CIBIL report is by paying off the remaining loan amount.
Once the loan amount is repaid, get a “No Dues” certificate from the lender, and request the lender to update the cleared status against the loan. You can also raise a dispute with CIBIL regarding the same.
Since it can ruin your score and future financial prospects, it is advisable to not choose settlement as an option. You can instead ask the lender for more time, stating your predicament, to pay off the loan.
Not only will you have ample time to repay the loan, but you can also save your CIBIL score from slipping 100 points.
How To Update CIBIL Score After Settlement?
Rebuilding your credit score after settlement can be a tiring and demanding process.
CIBIL or any credit bureau assigns a credit score after gathering accurate credit information regarding the borrower from the lenders. The score depends on various parameters with varying weightage. The paraments are:
- Repayment history
- Amount owed
- Length of Credit History
- Credit mix
- Credit utilization ratio
- Number of loans availed
To understand how each factor impacts your CIBIL score, take a look at “Factors Affecting CIBIL Score”
While securing a loan after “settlement” is rather difficult, you can a small loan within your means and clear it off to start rebuilding your credit profile. In case your CIBIL credit score indicates that the debt has not been repaid, lenders and banks may refuse to give you a loan. So pay off your dues to keep your CIBIL score consistent.
