How to improve CIBIL score after Credit Card Settlement?
what is Credit card settlement?
Suppose a customer has taken a credit card and after using it, instead of paying the full outstanding amount, they negotiate with the company, take a discount on the outstanding amount, make the payment, and close the card. This process is called settlement. Here, the card is closed by making a one-time payment. That is why it is sometimes called One Time Settlement, and in short it is also called OTS.
How does Credit Card Settlement work?
Suppose someone has taken a credit card and after using it, they continuously do not make payment for 3 months. If payment is not made for 3 months, then the account goes into NPA status. This is very common. What I have seen is that once someone misses a payment, after that it becomes very difficult for them to continue paying because the interest rate on credit cards is very high and the outstanding amount increases very fast. In many cases, the customer is unable to pay the full amount for 5–6 months. Then, to recover the money, the credit card company offers them a settlement option where they can pay a discounted amount and close the card. The customer agrees to this, negotiates with the company, makes the payment, and closes the card. This becomes a compromise settlement.
After the settlement is completed, the credit card company sends a “settled” status for that particular credit card account to the customer’s CIBIL report. Now, it is not always necessary that the company will offer settlement after only 5–6 months. Some credit card companies may take more time before offering settlement. Sometimes, customers themselves request the company for settlement. In a few cases the company agrees, but in most cases they do not. Most of the time, this settlement offer comes from the company’s side.
How does Credit Card Settlement impact on CIBIL?
It has a very bad impact. When you do a credit card settlement, the credit card company writes “Settled” status on that particular account in your CIBIL report. “Settled” status is a negative status because of which it becomes difficult to get loans easily. If you do a settlement, your score can drop by around 50 to 60 points. Still, this is not specific because points decrease based on the CIBIL algorithm. Yes, for different customers, depending on their profile, the score may fall more or less than this.
Lenders feel that you are a risky customer. They think that if a loan is given to you, then you may not repay the loan completely because earlier also after taking a loan you did not pay the full amount. In most cases, unsecured loans and credit cards are not approved. Yes, in mortgage loan cases, banks may still consider it. If your credit card settlement is 5 years old, then many banks may still provide home loans or mortgage loans. If it becomes 10 years old, then most popular banks may also provide home loans or mortgage loans to such customers. But in the case of unsecured loans, it is still difficult.
How many years does credit card settlement stay on your CIBIL Report?
In India, there is a myth. Many people say that “Settled” status gets removed from the CIBIL report after 7 years. But this is not true. The confusion exists because in India, credit bureaus like CIBIL, Experian, and Equifax also operate in the USA. In the USA, there are rules where bankrupt accounts may get removed from records after 7 or 10 years. But in India, there is no such rule. Being a CIBIL rectification agency, I have seen many customers whose CIBIL reports still show credit card settlements that are 10 to 15 years old. The “Settled” status is removed only after the remaining amount is paid completely. I will explain this in more detail further ahead.
How to improve CIBIL score after Settlement?
Contact with the lender
The first thing you need to do is remove the “Settled” status from your credit card account. To remove the “Settled” status, you have to pay the remaining discounted amount that was waived during settlement. Yes, some banks may also say that along with the discounted amount, you will also have to pay interest. Only after paying the full amount can they remove the “Settled” status.
For this, contact the bank or credit card company. In most credit card companies, if you send them an email, they will send you an outstanding letter, which is also called a demand letter. Pay the full amount they are asking for. In some cases, you may also negotiate with them. Even after negotiation, if you make the payment, they may still remove the “Settled” status. But make sure to clearly ask them whether after making the payment, your “Settled” status will be removed or not.
Pay the remaining outstanding and collect NOC
Now, in 2025, a new problem has also come up. Some people settled their account after it was written off, where the status shows as “Post Write-Off Settled.” In such cases, if you make further payment, some banks remove the “Post Write-Off Settled” status and replace it with “Post Write-Off Closed” status. Still, “Post Write-Off Closed” status is better than “Post Write-Off Settled” status.
As I said earlier, after paying the outstanding amount, you should also collect an NOC (No Objection Certificate). Here, you should take a fresh No Due Certificate again. Earlier, when you did the settlement, you may have received a No Due Certificate mentioning that it was a compromise settlement. But now your account has been closed properly as a standard closure, and this should be clearly mentioned in the certificate. You must collect this updated No Due Certificate because it will help you in CIBIL rectification and also when you apply for loans in the future.
Raise a dispute in CIBIL
After this, you should definitely raise a dispute in CIBIL because a settled account is not treated like a regular active account. It does not get updated every month. Even after you make the payment to the bank, sometimes the bank does not update the status in CIBIL immediately. Because of this, the update may take a very long time, and in some cases, it may not get updated at all. That is why you should raise a dispute in CIBIL. You can raise a dispute in two ways. Being a CIBIL rectification agency, we usually follow both methods.
One method is to log in to the CIBIL portal and raise a dispute directly there. Another method is if you have a free report, bank report, or report downloaded from another website, or if you are unable to log in to the CIBIL portal, then you can submit a written complaint. On the CIBIL website, you will find a complaint form. You can fill out that form, explain your issue, and attach supporting documents. This is also a very powerful method.
When you raise a complaint in CIBIL, CIBIL forwards the complaint to the bank. But due to inter-departmental miscommunication within banks, sometimes it takes a lot of time, and in some cases, the problem does not get solved properly. So, apart from raising a dispute in CIBIL, you should also send an email directly to the bank along with the money receipt and No Due Certificate. This can help resolve your issue much faster.
To improve your CIBIL score, pay EMI on time
After removing the “Settled” status, you can take some small steps to improve your score. Pay all your loan EMIs on time regularly. If you continue making payments on time, your score gradually improves. You can also take a credit builder loan. Once you have settled a credit card, getting a normal regular loan becomes difficult. In that case, a credit builder loan can help. Now, what is a credit builder loan?
Avail a Credit Builder Loan
Here, you can take a secured credit card. Since you have already settled a credit card, getting a regular credit card may not be easy. In this case, you can deposit money in a bank and take a secured credit card against that deposit.
After getting the secured credit card, continue making repayments on time. One important thing to remember is that your credit card utilization should remain within 30%. Never use more than 30% of your card limit. If you use more than that, then immediately make the payment and reduce the outstanding amount.
Use a Credit Mix
You can maintain a good credit mix. For example, you can take a mortgage loan, home loan, or gold loan because these are easier to get. Yes, secured credit cards are also easier to obtain. Normally, in the beginning, getting a personal loan from a good bank may not be easy.
You can also use app-based loans. There are many app-based companies that provide small personal loans even after credit card settlement. But here you need to be careful because many app-based loan companies charge very high interest rates and additional charges. A good credit mix helps in improving your score significantly.
Avoid New Credit Applications
After doing a credit card settlement, do not immediately apply for too many personal loans or unsecured loans. If your applications keep getting rejected repeatedly, your score may fall even further due to multiple inquiries. First, discuss your CIBIL situation with the lender and ask whether you are eligible for the loan or not. If they give you a green signal, then only apply for the loan.
Suppose you applied for a loan in a bank and the bank manager rejected your application saying that there is a problem in your CIBIL report or your CIBIL score is low. But after checking the report yourself, you are unable to understand where the problem is or why your score is low.
In that case, you can share your CIBIL report with the ScoreRocket team. They will analyze your report and explain where the problem is and why your score is low. After that, if you want CIBIL rectification services, you can also take our paid service. Our helpline number is given below in the description. You can contact us anytime. You can also WhatsApp your report to us.