✅ Table of Contents
- Introduction: Why Loan Settlement Hurts Your CIBIL Score
- What Is Loan Settlement in CIBIL Report?
- Difference Between “Loan Settlement” vs “Loan Closure”
- Why Lenders See Loan Settlement as a Red Flag
- How Loan Settlement Affects Your CIBIL Score
- Can You Remove Settlement from CIBIL Report?
- Step-by-Step Guide to Remove Loan Settlement from CIBIL Report
- How Long Does Settlement Stay on CIBIL Report?
- Best Ways to Rebuild Your Credit Score After Settlement
- Frequently Asked Questions (FAQs)
- Final Thoughts
1. Introduction: Why Loan Settlement Hurts Your CIBIL Score
Your CIBIL score plays a critical role in your financial life. If you’re planning to take a personal loan, credit card, or even home loan, your score needs to reflect responsible credit behavior.
But what happens when you settle a loan?
While it may feel like a relief, loan settlement doesn’t mean “loan closure.” It gets recorded in your CIBIL report as a negative mark, warning future lenders that you didn’t repay the full amount.
The result?
Low CIBIL score, loan rejections, and higher interest rates.
In this post, we’ll show you how to remove loan settlement status from your CIBIL report, the right way.
2. What Is Loan Settlement in CIBIL Report?
Loan settlement means you and your bank agree to close the loan account by paying less than the total amount due.
This usually happens when:
- You’re unable to repay due to financial hardship.
- You negotiate with the bank to pay a partial amount.
- The bank accepts the partial payment and marks the account as “Settled”.
This “Settled” status gets reported to CIBIL and stays on your report for up to 7 years.
3. Difference Between “Loan Settlement” vs “Loan Closure”
| Feature | Loan Settlement | Loan Closure |
|---|---|---|
| Payment | Partial | Full |
| Report Status | “Settled” | “Closed” |
| Impact on Score | Negative | Positive |
| Future Loan Approval | Very difficult | Easier |
Most people assume both mean the same. But for CIBIL, they are completely different.
Always aim for “Closed” status, not “Settled.”
4. Why Lenders See Loan Settlement as a Red Flag
Lenders check your CIBIL report before giving any loan or credit card.
If your report shows “Loan Settled”, it means:
- You failed to repay in full.
- You may be a risky borrower.
- You might default again.
Hence, banks either reject your loan, or charge higher interest rates.
Even one settled loan can kill your chances of getting a credit card or any unsecured loan in future.
5. How Loan Settlement Affects Your CIBIL Score
Loan settlement can reduce your score by 75–125 points instantly.
It also affects your score over time in these ways:
- Lowers your creditworthiness
- Affects your credit mix
- Increases your credit risk profile
Even if you pay all other EMIs on time, this one “settled” loan brings down your overall credibility.
6. Can You Remove Settlement from CIBIL Report?
Yes, you can remove or change the “Settled” status in your CIBIL report.
But not directly. CIBIL doesn’t allow individuals to manually edit reports. You must follow a structured process involving your lender.
7. Step-by-Step Guide to Remove Loan Settlement from CIBIL Report
Here’s how to remove “settled” status and get it changed to “closed” – permanently:
✅ Step 1: Get Your Latest CIBIL Report
- Visit https://www.cibil.com/
- Get a free report or paid detailed report
- Identify the loan account showing “Settled” status
✅ Step 2: Contact Your Lender
Reach out to the bank or NBFC where you had the loan.
You can:
- Visit the branch
- Call customer care
- Send an email to the grievance team
Ask them for a “full and final settlement clearance” or pay the remaining balance if possible.
✅ Step 3: Negotiate to Pay the Remaining Amount
Banks prefer full payments. Offer to pay the remaining dues in exchange for:
- Changing the status from “Settled” to “Closed”
- Issuing a No Dues Certificate (NDC) or Loan Closure Letter
✅ Step 4: Get a Written Confirmation
Ask for written proof that the loan will now be marked “Closed” and not “Settled.”
Save:
- Final payment receipt
- Email or letter stating the update
- Loan closure certificate
✅ Step 5: Request the Bank to Update CIBIL
Banks are responsible for updating CIBIL. Request them to:
- Update your loan status to “Closed”
- Remove “Settled” remark from your credit history
Banks usually update CIBIL within 30–45 days.
✅ Step 6: Raise a Dispute on CIBIL Website
If the status is not updated after 45 days, raise a dispute:
- Visit: https://www.cibil.com/dispute/
- Select ‘Credit Report Dispute’
- Choose the loan account and request correction
- Attach supporting documents
CIBIL will resolve your dispute in 15–30 working days.
8. How Long Does Settlement Stay on CIBIL Report?
If not removed, the “Settled” status remains on your report for up to 7 years from the date of update.
This hurts your:
- Home loan eligibility
- Credit card approvals
- Low-interest personal loan options
That’s why it’s critical to get the “settled” status removed or corrected as early as possible.
9. Best Ways to Rebuild Your Credit Score After Settlement
Even if you can’t remove the “settled” tag immediately, you can start rebuilding your CIBIL score:
✅ Apply for a Secured Credit Card
- Get one from SBI, Axis, ICICI, or Kotak
- Use it responsibly
- Pay full dues monthly
✅ Pay All EMIs and Bills On Time
- Use auto-debit options
- Avoid late payments
✅ Avoid Multiple Loan Applications
- Each application creates a “hard inquiry”
- Too many reduce your score
✅ Maintain Credit Utilization Under 30%
- Don’t use full card limits
- Keep spending low
✅ Monitor Your Credit Report Every 3 Months
- Use CIBIL or free apps like Paytm, Paisabazaar, OneScore
10. Frequently Asked Questions (FAQs)
❓ Can I remove loan settlement from CIBIL myself?
No. Only your bank can update the loan status. You can raise a dispute on CIBIL, but correction happens only when the lender confirms.
❓ How long does it take to remove the settled status?
Usually 30–60 days after you clear dues and request the bank to update.
❓ Can I get a loan after settlement?
Yes, but chances are lower. You must clear old settlements and rebuild your score first.
❓ Will CIBIL remove settlement automatically after 7 years?
Yes, negative marks automatically disappear from your report after 7 years, but it’s better to resolve them early.
11. Final Thoughts
Loan settlement may feel like a quick solution, but it causes long-term harm to your CIBIL score and financial health.
If you’ve already settled a loan, don’t panic. You can still:
- Pay the remaining amount
- Request the lender to mark it “Closed”
- Raise a dispute with CIBIL
- Start rebuilding your credit step-by-step
The key is to act now – not wait for 7 years. A clean CIBIL report means better chances for future loans, credit cards, and lower interest rates.
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At ImproveCibil.com, we offer personalized CIBIL Improvement Consulting via WhatsApp.
Let us help you remove loan settlements and grow your credit score fast.
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If your CIBIL score remains the same even after following the proper steps to remove the loan settlement status, don’t worry — you’re not stuck. Here’s what you can do next, step-by-step:
✅ 1. Double-Check CIBIL Report (After 30–45 Days)
- Go to CIBIL.com and download your latest credit report.
- Confirm whether the status has changed from “Settled” to “Closed.”
- If it still says “Settled”, the bank has not updated your record properly.
✅ 2. Follow Up With Your Lender (Politely But Firmly)
- Contact the bank/NBFC where you settled the loan.
- Show them the:
- Payment proof (if you paid the remaining amount)
- Closure or NOC letter
- Email or reference of previous conversation
- Request them again to update the status to CIBIL as “Closed”.
🔁 Sometimes, banks forget or delay CIBIL updates. Regular follow-up works.
✅ 3. Raise a Dispute with CIBIL Again
- Go to CIBIL Dispute Page
- Raise a “Credit Report Dispute”
- Choose the specific loan account
- Add comments like:
"Settled status needs to be corrected to Closed as per final payment & NOC from lender" - Attach proof if available.
CIBIL will contact the bank and investigate. The process takes 15–30 working days.
✅ 4. Rebuild Your Score With These Proven Actions
If the status can’t be changed, then work on overcoming its impact. Here’s how:
🔄 a. Get a Secured Credit Card
- Apply with FD-backed cards from SBI, ICICI, Axis, or Kotak
- Use it monthly and pay bills in full
💳 b. Take a Small Consumer Durable Loan
- Buy a mobile, TV, or appliance on EMI
- Repay consistently for 6–9 months
🧠 c. Avoid Any Missed Payments
- Use auto-debit for all current EMIs
- Avoid cheque bounce or delays
📊 d. Maintain Low Credit Utilization
- Keep your usage under 30% of your credit card limit
🔎 e. Monitor Credit Score Monthly
- Use tools like OneScore, Paytm, or Paisabazaar
❌ Avoid These Mistakes
- Don’t apply for multiple loans at once (it causes score drops)
- Don’t close old good-standing credit cards
- Don’t ignore credit report updates for months
📌 Final Advice
Even if the “settled” tag remains, your CIBIL score can still improve by:
- Paying on time
- Using secured credit
- Maintaining financial discipline
📈 Within 6–12 months, you can cross 700+ score, and get approved for new credit despite past settlements.
✅ Top 10 Tips for Raising an Effective Complaint in CIBIL Department
1. Collect All Evidence Before You File a Complaint
Before you raise a dispute, gather:
- Loan closure letters / NOC
- Payment receipts
- Settlement letters (if any)
- Email communication with the bank
📌 Why it matters: CIBIL only updates reports after bank confirmation, so proof is key.
2. Download Your Latest CIBIL Report
Get your report directly from:
👉 https://www.cibil.com/
Check:
- Account status (“Settled”, “Written-Off”, “Open”, etc.)
- Errors in personal details or credit limits
📌 Download PDF version and keep it for record before dispute.
3. Use the Official CIBIL Dispute Portal
Go to:
👉 https://www.cibil.com/dispute/
Click on ‘Dispute Center’ → ‘Credit Report Dispute’.
You’ll need:
- Control Number (from your credit report)
- Details of the account to dispute
🛑 Don’t use third-party apps for raising official disputes.
4. Be Clear and Specific in Your Complaint
Example message:
“My personal loan account ending with 7625 has been marked as ‘Settled’. However, I have repaid all dues and have an NOC from HDFC Bank. Please update the status to ‘Closed’ and correct my credit report.”
🎯 Avoid emotional language. Be factual, brief, and professional.
5. Attach Strong Supporting Documents
You can upload:
- Final payment proof
- No Dues Certificate (NDC)
- Loan closure confirmation email
- PAN card (for ID proof if required)
📌 More documentation = faster and stronger resolution.
6. Raise a Complaint Directly With the Bank First
Before CIBIL can fix anything, the bank/NBFC must confirm.
Steps:
- Email your lender’s grievance/redressal team
- Mention your CIBIL issue and attach supporting proof
- Ask them to report correct status to CIBIL
💡 Most issues get resolved faster when you push the bank first.
7. Track the Complaint Using CIBIL Reference ID
After submitting the dispute, you’ll receive a Service Request Number (SRN).
✔ Keep it safe
✔ Use it to follow up on email
✔ CIBIL usually responds within 15–30 days
8. Don’t Raise the Same Complaint Multiple Times
If you submit multiple disputes for the same issue:
- It confuses the system
- Slows down resolution
🔁 Only raise a new dispute if the previous one is closed without action.
9. Escalate If No Action After 30 Days
If your dispute is not resolved in 30 working days:
- Send a follow-up email to info@cibil.com
- Mention your SRN and attach all earlier documents
- Escalate to the Consumer Services Head (via CIBIL website)
📩 You can also try contacting them via their Twitter handle (@CIBIL_Official) for faster attention.
10. Keep a Written Log of All Communications
Create a simple file with:
- Dates of complaints raised
- Emails sent
- Responses received
- Reference numbers
🗂 It helps if you escalate to Banking Ombudsman or RBI later on.
✨ Bonus Tip: Work With a Credit Consultant (If It’s Urgent)
If you’re applying for a home loan, visa, or business funding, and time is limited:
- Consider hiring a professional CIBIL consultant
- They’ll negotiate with the bank on your behalf
- Help with settlement removal, NOCs, and faster updates
📌 Final Thoughts
Fixing your CIBIL report requires patience + documentation.
Follow these 10 expert tips to file strong, trackable, and successful complaints with the CIBIL department and your bank.
💪 Every point of credit score matters — take charge today!