Credit settlement doesn’t impress your lenders
25.08.2015 12:07

People nowadays find it convenient to use the credit card to settle the payments instead of dealing with cash. They prefer to pay the bills at the end of the month after checking the expenses. When you are dealing with the credit cards, it is not just the repayment dates that you need to be concerned about, you must also take care of the incorrect charges, fraudulent transactions, errors in the bill, card being upgraded without your consent etc. These problems only come to light when you receive the bill. This in turn leads to a lengthy procedure of discussions with the lender and the issue might take a long time to settle. And the conflict will be reported in your CIBIL report and it affects your CIBIL score.

To resolve or to pay the bill?

The next step is to decide if you want to pay the bill or resolve the issue. If there is an issue do not leave it unresolved and sweep it under the carpet. They will turn into bigger problems and the due amount on your bill will keep increasing. And if you keep missing the deadline to pay the bill, the bank will record it with CIBIL and it will affect your CIBIL score. The lenders usually insist that the customer first clear the due amount and it is not fair that the customer has to pay for some charges that was not made by him.

Solution offered by the lenders

The only solution that the lender offers to the customer is a settlement. Both the parties agree on a certain amount. The lender is fine with the amount and they put a remark in the
CIBIL report of the customer saying that the bill was ‘settled’. Customer on the other hand is happy that the issue was resolved and that they did not have to pay for the expenses fraudulently charged on their card.

How is ‘settled’ status referred by the future lenders?

When the lender puts the ‘settled’ remark on the customer’s CIBIL report, it is completely different from a ‘closed’ status. The ‘closed’ status refers to the entire amount being paid off including the dues and other charges, whereas, ‘settled’ status means that a negotiated amount was paid off and that the lender chose to settle for the amount. The ‘settled’ status is a remark on the customer’s CIBIL report.

The future lenders consider the ‘settled’ status as a negative remark. This remark stays on the CIBIL report for a minimum period of 7 years. The lenders take this credit behaviour by the applicant very seriously and it serves as a ground for them to deny loan to the applicant having the ‘settled’ remark in their CIBIL report. Lenders will offer loans to the applicants having a CIBIL score of 750 and in the absence of a negative remark. The lender red flags the applicants who have a ‘settled’ status on any of their accounts and this makes it difficult for the applicant to get any loan in the future.

How can one erase the ‘settled’ status and close the loan?

The ‘settled’ status remains as long as the dispute is continuing. Only the lender can change the status on the customers’ CIBIL report. The dispute resolution request can be taken up by the credit bureau, but you can start by clearing the status by paying all the pending charges and the lender will accept the payments and update their reports accordingly. It takes up to 30-45 days from the date of the payment for the status to change to ‘closed’ on your CIBIL report. When the remark is changed, it indicates that the issue has been resolved.

If you do have a credit card, keep a check on where you are using it and check for the amount that is due constantly so that you are not a victim of fraud and so that you will not have to bear expenses that were not incurred by you. Always focus on keeping a healthy CIBIL score.



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