What does the status “settled” mean on your credit report?

Many lenders reject requests from borrowers if their credit reports say “regulated” for a loan or credit card account. In this case, it doesn’t matter how old the loan is or your current score.

The “Settled” status on your report means that you have not fully paid off a loan. Let’s take an example to understand it. Suppose an individual got a credit card 15 years ago when he started his first job. New to credit, he then spent too much money on the credit card.

Since he could not maintain a financial disciple on a limited salary, there was a great delinquency. Unable to get the money back, the issuer asked him to pay a lower amount and settle the membership fee. If the person chose to do so, the issuer would report this account as “settled”.

This means that the cardholder was in default and the issuer had to recover their basic contribution from them. The status “settled” would continue to be reflected on your credit report. Most lenders do not want to give a loan to a borrower who has to pay the outstanding amount. Therefore, they reject the loan application.

Your past credit behavior has a lasting impact. Lenders see “settled” as risky, primarily because if you haven’t fulfilled your repayment obligation before, chances are you’ll do it again.

Can you change this? Your card issuer or lender can change the status if they want to. You will need to contact the lender or the card issuer with a willingness to pay the amount owed. Once you have paid the full amount owed, the lender would stop reporting the account as “settled”.

Remember to take a No Objection Certificate (NoC) from the lender or card issuer once you have paid all dues. If the bank still does not remove the settled status, raise a dispute with the credit bureau. The credit bureau will verify the status with the bank and change the status from “settled” to “closed” within 30 days if the bank agrees.

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