Often, borrowers choose to settle or default on a loan if they are facing difficulties repaying the loan. It can have drastic effects on their credit score and damage their financial future.
In this article, we explore how “written off” and “settled” statuses on your CIBIL report affect your credit score, and how you can clear them.
The term “Written off” on a CIBIL report signifies that the lender could not retrieve the loan amount from the borrower, despite multiple tries, and had written off the dues.
The lender then sends this information to their reporting credit bureau, which updates the credit report with the “Written Off” status.
A “Written-Off” remark on your credit report will reduce your CIBIL score drastically. It will hurt your chances of securing any form of credit in the future. Moreover, it takes a long time to remove the status from your CIBIL report.
It is possible to remove the “written off” status from your CIBIL report, even though it is a time-consuming and challenging process. Here is how to clear written off in CIBIL.
Step 1: Approach the lender to find out the amount you owe
Step 2: Negotiate with the lender on how you will be able to pay back the amount
Step 3: Once the loan is settled or cleared, obtain a “No Dues Certificate” or a letter stating the dues have been paid off from the lender
Step 4: Additionally, request the lender to update the latest loan status with the credit bureau
Step 5: You can also directly approach CIBIl and raise a dispute to clear the “Written off” status
Step 6: Submit all the necessary documents as proof of your loan clearance
Step 7: Follow the request with CIBIL until your CIBIL report is updated and the “Written-off” status is removed
CIBIL does not have the authority to change the status until the lender updates the bureau with relevant information. Hence, approach the lender first and secure the necessary documents to support your dispute.
orrowers often face unprecedented challenges while repaying the loan. It can be due to loss of income, accidents, illness, or any other unavoidable circumstances.
In such cases, they can re-negotiate the terms of the loan agreement with the lender or “settle” the loan if the lender agrees.
Settlement of the loan involves the borrower paying only a part of the loan and the lender forgives the rest of the amount due. This leads to the lender updating the loan status as “Settled”.
The vast majority of borrowers are unaware of how a “Settled” status affects CIBIL score. While settling the loan might give you an out at the moment, it ruins your credit score and further makes it hard to secure credit at desirable terms.
The “Settled” status stays on your credit report for as long as 7 years. If you decide to take another loan during this period, a potential lender might not consider your application with a “settled” status.
Hence, as a borrower, you must anticipate the drastic effects settling can have, if you choose to do so.
The only way to remove a settled status from your CIBIL report is by paying off the remaining loan amount.
Once the loan amount is repaid, get a “No Dues” certificate from the lender, and request the lender to update the cleared status against the loan. You can also raise a dispute with CIBIL regarding the same.
Since it can ruin your score and future financial prospects, it is advisable to not choose settlement as an option. You can instead ask the lender for more time, stating your predicament, to pay off the loan.
Not only will you have ample time to repay the loan, but you can also save your CIBIL score from slipping 100 points.
Rebuilding your credit score after settlement can be a tiring and demanding process.
CIBIL or any credit bureau assigns a credit score after gathering accurate credit information regarding the borrower from the lenders. The score depends on various parameters with varying weightage. The paraments are:
To understand how each factor impacts your CIBIL score, take a look at “Factors Affecting CIBIL Score”
While securing a loan after “settlement” is rather difficult, you can a small loan within your means and clear it off to start rebuilding your credit profile. In case your CIBIL credit score indicates that the debt has not been repaid, lenders and banks may refuse to give you a loan. So pay off your dues to keep your CIBIL score consistent.
Settlement or Written-off statuses on your CIBIL report have extreme consequences. They will drastically reduce your credit score and make it harder for you to secure a loan in times of financial hardship. Lenders often allow borrowers to re-negotiate the loan terms to suit their financial situation if they are unable to repay the loan. Seek help from your lender before choosing a settlement or defaulting on the loan.
You must pay the remaining balance on your loan and obtain an NOC (No Objection Certificate) from the lender in order to remove the 'Settled' status from your CIBIL report. Next, raise a dispute with CIBIL by providing the required proof. After confirming with your lender, the credit bureau will update the status from “Settled” to “Closed” within 30 days.
CIBIL doesn’t maintain a defaulters list. It only gathers credit information from the landers and updates the credit scores of the borrowers in accordance with their credit behavior.
Once you have repaid the loan, your CIBIL score will improve.
If you haven't made a loan payment or credit card payment for at least 180 days, your loan status will be updated to 'Written Off'. You must pay back the entire outstanding loan amount to remove the 'Written Off' status from your credit report. Further, you need to request a 'No Due Certificate' from the lender and submit it to the CIBIL bureau. To totally delete the status from the credit record, it will take between 7 to 15 working days.
Yes. Although it takes time, you can repay your other existing loans, if you have any, to rebuild the score. But first, you must attempt to pay off the debt of the “settled” loan to revive your CIBIL score.
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