In this day and age, when it is impossible to afford a decent lifestyle without the help of credit and loans, it is crucial that borrowers maintain a good CIBIL score. The CIBIL score is a three-digit number between 300 and 900 that reflects a borrower’s creditworthiness and repayment capacity. Lenders consider anything above 750 a very good CIBIL score and borrowers who have such a CIBIL score get offered loans on highly beneficial loan terms and conditions. On the other hand, instances of loan default and loan settlement are seen as a serious aberration of trust by lenders and credit rating agencies. Such cases, therefore, harm a borrower’s CIBIL score and hamper their ability to avail of a loan in future. This article focuses on loan settlements, what is written off in CIBIL, how a loan settlement affects a borrower’s CIBIL report and how can one remove the settled status from CIBIL.
What are Settled Accounts?
All borrowers avail of loans after proper planning. Almost everyone avails of an amount they can easily repay. However, sometimes, we find ourselves surrounded by situations that make our financial stability take a hit. When this happens, it becomes difficult for borrowers to honour their EMI and other financial commitments. When borrowers feel convinced that they cannot afford to pay their EMIs on time, they approach lenders and request a loan settlement. A loan is considered settled when a borrower and a lender agree to an alternate repayment term under which a lender agrees to close the borrower’s loan account by accepting an amount lower than the actual due amount. On the other hand, when a borrower closes a loan account or a credit card by paying the entire amount due, the account is considered closed.
Once you have settled or closed an account, your lender will pass on this information to credit information bureaus and the credit information bureaus will update your CIBIL report. If you settled the account, your CIBIL report will read ‘Settled’. On the other hand, if you closed the loan account by paying the entire amount due, your CIBIL report will read ‘closed.’ When a borrower closes a loan account, their CIBIL score goes up since they honoured a commitment they made to their lender. On the other hand, when a borrower settles a loan account, their CIBIL score takes a hit. Settling a loan account can make one’s CIBIL score drop by 75 to 100 points. Lenders also see loan settlements as an aberration of trust and therefore, settled accounts reduce one’s chances of availing of a loan such as housing loan or Loan Against Property in future. It is, thus, that borrowers are advised against settling loans. If a borrower finds themselves unable to pay their EMIs, instead of requesting a loan settlement, they must approach their lender, explain their situation to them and request a loan extension to make paying their EMIs easier.
How to Remove the ‘Written Off’ Status from a CIBIL Report?
Here are the steps to remove the ‘Written Off’ status from your CIBIL report:
Step 1: Request your CIBIL report
First and foremost, request a copy of your CIBIL report. You can obtain the same from the CIBIL website. Then, review this report carefully and check if the 'Written Off' status is properly reflected.
Step 2: Validate “Written Off” status
Once you find out a ‘Written Off’ status in your CIBIL report, assess if the status is incorrect and if you have sufficient grounds for raising a grievance.
Step 3: Inform the concerned lender
Contact your lender, explain your grievance and request them to rectify the status. You will have to provide some evidence supporting the incorrectness.
Step 4: Settle outstanding dues
If you have any outstanding dues with the lender, settle them in full or settle a mutually agreed-upon amount. Once the payment is completed, ask them to update the same on your CIBIL report.
Step 5: Request for a No-Due Certificate
Once you have cleared all your outstanding dues, you can request your lender for a No Due Certificate, which acts as proof that you do not have any outstanding debt.
Step 6: File a grievance with CIBIL
If the lender seems uncooperative and your ‘Written Off’ status is not removed, you can file a grievance with CIBIL to resolve the dispute. Visit CIBIL’s website and provide the details and required documents to complete the process.
Step 7: Follow up
Stay in touch with the raised issue and check the status of your grievance. It may take several days but it will get resolved, and the ‘Written Off’ status will be removed from your credit report.
