How to Remove Settled Accounts from CIBIL Reports?
Yes, it is possible to remove settled accounts from credit reports. However, the only way to do so is to clear the outstanding balance amount pending on your previous lender. Once you have cleared the outstanding balance amount, obtain a no-objection certificate from your previous lender and submit it to the credit information agencies. Once you do this, the credit rating agencies will change the status of your loan account from ‘settled’ to ‘closed’.
Sometimes, a borrower’s CIBIL report shows ‘settled’ even when the borrower has never settled an account. This happens when lenders and financial institutions pass on wrong information by mistake to credit rating agencies. In this case, you can get CIBIL to remove the ‘settled’ status by raising a dispute. Follow these steps to have the settled account removed from your CIBIL report in this case.
- Go to the official website of CIBIL and log in to your account with your credentials. If you do not have an account, create one to file a dispute.
- Go to ‘Credit Reports’ on the dashboard and then select ‘Dispute Centre’.
- Next, select ‘Dispute an Item’. Once you do this, an online application form will open.
- Fill in the details and submit the form.
CIBIL will act immediately, and you can expect to see an updated credit report within a few weeks.
Also Read: Why Is Credit Report Important?
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.
