How a ‘Settled’ Status Can Affect Your CIBIL Score and Your Home Loan Chances

Banner-Dynamic-Scroll-CockpitMenu_HomeLoan

How a ‘Settled’ Status Can Affect Your CIBIL Score and Your Home Loan Chances

6 min 03 Jul 2025
Highlights:
  • What does ‘Settled’ Status Mean?
  • Impact Of ‘Settled’ Status on Your CIBIL Score
  • Difference Between ‘Settled’ and ‘Closed’ Status
  • How to Improve Your CIBIL Report After Settlement?
  • Should You Settle a Loan or Pay in Full?

Owning a home is a dream for many, and often, a Home Loan is what turns that dream into reality. But before a lender approves a loan, they assess the borrower’s CIBIL report. The word ‘Settled’ on the credit report may sound like the loan has been closed, but it is worth looking a little closer.  

In this article, we will look at what a ‘settled’ status means, the impact it has on your CIBIL score, and how to rebuild your credit score. 

What does ‘Settled’ Status Mean?

Think of it this way—if a borrower has difficulty repaying a loan in full due to unforeseen challenges such as a job loss, medical emergency, or other financial setbacks, the lender may offer a compromise. Instead of insisting on the entire outstanding amount, they might agree to accept a reduced lump-sum payment—commonly known as a ‘settlement’. Once this payment is made, the lender marks the account as ‘Settled’ in the borrower’s credit report. 

So, what does settled status mean? Put simply, it indicates that the loan was not repaid in full but resolved through partial repayment. While this helps close the account, it may not always reflect favourably when assessing future creditworthiness. 

Impact Of ‘Settled’ Status on Your CIBIL Score

When a loan is marked as ‘Settled’, it reflects that the borrower repaid only a portion of the total outstanding amount, rather than the full sum originally borrowed. This may offer some relief during a difficult financial phase, but it also indicates that the loan wasn’t fully repaid.  

As a result, the credit score typically takes a hit, though the extent of the drop depends on several factors. Even though the account is technically closed, the ‘Settled’ tag can be visible on the CIBIL report for up to seven years. During this period, applying for new credit may be challenging.  

Difference Between ‘Settled’ and ‘Closed’ Status 

Knowing the difference between ‘Settled’ and ‘Closed’ status is essential. A ‘Closed’ account means you have paid the full amount owed, including principal, interest, and any applicable charges, exactly as agreed in the original terms. 

On the other hand, a ‘Settled’ status means the loan was only partially paid off and closed by mutual agreement. While both statuses show that the account is no longer active, only the ‘Closed’ tag indicates better credit management.  

How to Improve Your CIBIL Report After Settlement?

A ‘Settled’ tag does not permanently define a borrower’s credit journey. Improving one’s credit profile after a settlement is possible. Here is what can help:  

  • First, request a No Dues Certificate from your lender. This confirms that there are no pending obligations. 
  • Raise a dispute on the CIBIL website (especially if your report has errors) and attach supporting documents.  
  • Pay EMIs and credit card bills on time. 
  • Keep your credit utilisation under 30%, and avoid multiple loan applications in a short span.  

Should You Settle a Loan or Pay in Full?

Paying off a loan in full is usually the more favourable route. When a borrower repays as per the original agreement, the account is marked as ‘Closed’. This helps maintain, or even improve, the credit score over time. It also reflects positively on financial discipline, which can support future credit approvals. 

However, if financial circumstances make full repayment unmanageable, a one-time settlement may become necessary. In such cases, it’s important to proceed carefully, understand the long-term implications and try to limit settlement to a single account wherever possible. Settling multiple loans within a short period can significantly affect credit health and may reduce access to high-value credit. Rebuilding credit step by step before seeking fresh credit can make a noticeable difference. 

A ‘Settled’ loan status might help in the short term, but it does come with a cost. The impact of ‘Settled’ status on your CIBIL score goes beyond just numbers. It can influence your overall credit health and affect your chances of securing favourable loan terms in the future. Understanding what settled status means, being aware of its long-term effects, and taking active steps to rebuild your credit profile can make a significant difference. 

Whenever possible, aim to repay your loans in full, as this reflects well on your credit history. But if a settlement becomes unavoidable, follow it up with responsible credit behaviour.  

Blog-Intro-Disclaimer

DISCLAIMER:

While care is taken to update the information, products, and services included in or available on our website and related platforms/websites, there may be inadvertent errors or delays in updating the information. The material contained in this website and on associated web pages, is for reference and general information purposes, and the details mentioned in the respective product/service document shall prevail in case of any inconsistency. Users should seek professional advice before acting on the basis of the information contained herein. Please take an informed decision with respect to any product or service after going through the relevant product/service document and applicable terms and conditions. Neither Bajaj Housing Finance Limited nor any of its agents/associates/affiliates shall be liable for any act or omission of the Users relying on the information contained on this website and on associated web pages. In case any inconsistencies are observed, please click on contact information.

Asset Publisher

Trending Articles
alt
home+loan Home Loan

[N][T][T][N][T]

BanglarBhumi West Bengal Land Records
2025-03-04 | 3 min
alt
home+loan Home Loan

[N][T][T][N][T]

How to Top Up your Home Loan
2025-03-04 | 3 min
alt
home+loan Home Loan

[N][T][T][N][T]

Tips to Secure Quick Home Loan Approval
2025-03-03 | 2 min
alt
home+loan Home Loan

[N][T][T][N][T]

Home Loan for Self-Employed Individuals
2025-03-03 | 2 min
alt
home+loan Home Loan

[N][T][T][N][T]

Khasra Number Explained: How to Find It
2025-01-03 | 2 min
alt
home+loan Home Loan

[N][T][T][N][T]

How to Pay Off Your Home Loan Quicker
2024-03-11 | 4 Min
alt
home+loan Home Loan

[N][T][T][N][T]

How to Calculate Home Loan EMIs
2022-06-14 | 5 Mins
alt
home+loan Home Loan

[N][T][T][N][T]

How to Choose the Best Home Loan?
2023-08-09 | 4 min
alt
home+loan Home Loan

[N][T][T][N][T]

What is the Ideal Age to Buy a House?
2025-03-19 | 2 min
alt
home+loan Home Loan

[N][T][T][N][T]

Benefits of a Home Loan
2023-02-20 | 4 min
alt
home+loan Home Loan

[N][T][T][N][T]

Types of Home Loan Charges
2024-01-22 | 3 Min

MissedCall-CustomerRef-RHS-Card