How to Improve CIBIL Score After Settlement

The term “settlement” signifies negotiated partial repayment of debt, instead of the entire amount. If the borrower fails to repay the full amount, the bank agrees to a certain settlement amount that is then paid by the borrower.

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Why Check Credit Score on Paisabazaar ?

Check Credit Score from All 4 Bureaus

Track Credit Score Seamlessly Every Month

Read Credit Report in Multiple Languages

Does Settlement Affect CIBIL Score?

Settlement negatively impacts the credit score of the borrower. Individuals with a “settled” loan status are considered credit risky and unworthy by the lenders. This results in rejection of loan and credit card applications in future.

How to Improve CIBIL Score After Settlement?

Pay the Outstanding Balance: The borrower can pay the outstanding balance of the loan and receive the “No Objection Certificate” or NOC from the lender. Thus, the loan status changes from “settled” to “closed”.

Make Timely Repayments: Make your credit card and loan repayments on time. Timely repayments gradually improve your credit score.

Keep your Credit Utilization Low: Try to maintain a lower credit utilization ratio to improve your credit score. Higher credit utilization ratio indicates that your are highly reliant on credit and thus carry a high credit risk.

Monitor your Credit Report: Once you have “closed” the “settled” debt and filed a dispute with the credit bureau, check your credit report for the updated status.
Avoid Credit Mix: Avoid using multiple credit cards and loans if cannot you manage them consciously.

How to Update Loan Status in Credit Report After Full Payment?

Your loan status can be updated after full payment in the following steps:

After making the remaining payment, obtain “No Objection Certificate” from the lender.
Raise a dispute on the CIBIL website.
The credit bureau confirms with the lender and updates the status to “closed”

Settlement v/s Foreclosure: Impact on CIBIL Score

Foreclosure	Settlement
Voluntary early closure of loan account after paying the entire outstanding amount.	Negotiation with the lender to pay a certain amount instead of the entire amount.
Improves the credit score.	Reduces the credit score.
Reflects as “closed’ in the credit report.	Reflects as “settled’ in the credit report.
“No Objection Certificate” issued by the lender.	No NOC is issued.

How to Check CIBIL Score for Free with Paisabazaar?

Step 1: Enter your mobile number in the application form

Step 2: Provide your personal details

Step 3: Enter OTP to verify your mobile number

Step 4: Select the credit score purpose and credit score amount

Apply Now

How to Check CIBIL Score for Free with Paisabazaar?

Step 1: Enter your mobile number in the application form

Step 2: Provide your personal details

Step 3: Enter OTP to verify your mobile number

Step 4: Select the credit score purpose and credit score amount

Apply Now

FAQs

Applicants with a “settled” loan history are not considered creditworthy and therefore, their loan applications are usually not approved.

Yes, you can change your loan status from “settled” to “closed” in CIBIL.

You can rebuild your credit core after settlement by making timely repayments, keeping the credit utilization low, avoiding credit mix, monitoring the credit report, etc.

The debt settlement stays in your credit report for as long as 7 years.

As per RBI guidelines, effective Jul 3, 2026, the credit report will now be updated on a weekly basis, instead of the monthly cycle.