What does 'settled' status means in your credit report?
- Many lenders reject borrowers' applications if their credit reports mention 'settled' for a loan or credit card account
Many lenders reject borrowers' applications if their credit reports mention "settled" for a loan or credit card account. In this case, it doesn't matter how old the loan was or what is your existing score.
"Settled" status in your report means that you didn't pay a loan entirely. Let's take an example to understand it. Suppose an individual got a credit card 15 years back when he started his first job. New to credit, he overspent on the credit card then.
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As he couldn't maintain financial disciple with a limited salary, there was a large outstanding. Unable to recover the money, the issuer asked him to pay a lower amount and settle the dues. If the individual opted for it, the issuer would report this account as "settled".
It means that the cardholder was a defaulter and the issuer had to recover its basic dues from him. The "settled" status would continue to reflect in your credit report. Most lenders would not like to issue a loan to a borrower who had to settle the outstanding. Therefore, they reject the loan application.
Your past credit behaviour has a long-lasting impact. Lenders view "settled" as risky, primarily because if you haven't met your repayment obligation before, there are chances that you might do this again.
Can you change this? Your card issuer or lender can change the status if it wishes to. You will need to approach the lender or the card issuer with a willingness to pay the due amount. Once you pay the entire amount due, the lender would stop reporting the account as "settled".
Remember to take a no-objection certificate (NoC) from the lender or the card issuer once you clear all the dues. If the bank still doesn't remove the settled status, raise a dispute with the credit bureau. The credit bureau will check the status with the bank and would change the "settled" status to "closed" within 30 days if the bank agrees.
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