After a loan settlement, how can you improve your CIBIL score?

cibil credit score

Whatever has gone wrong, be it an unforeseen circumstance, a medical emergency, or a financial crisis, you are still liable for your credit history. You must be financially responsible at all times and keep track of your credit card bills, EMIs, and dues

When things get out of hand and you’re having trouble paying your bills, your lender may offer an alternative to a One-Time Settlement (OTS). However, before accepting the account settlement offer, you must first grasp what OTS entails for you and your CIBIL Score.

What is the definition of a loan settlement?

A loan settlement is a final call to end an account that resolves the outstanding loan principal and interest amount by paying back a reduced payment. In most cases, the loan is settled at the principal amount, with the lender waiving any outstanding interest.

What impact does a debt settlement have on your credit score?

The lender, on the other hand, suffers a financial loss when a loan account is settled, therefore they write off the waived off amount in the accounts and record it as a loss. The Credit Bureau would receive the same information.

As a result, a loan settlement will appear on your credit report as a negative item. Any unfavourable information on your credit report will stay on your record for seven years, ruining your chances of getting a new loan in the future. The lender may also put you on a no-transaction list with their bank or financial institution in the future. As a result, before accepting the lender’s offer, you should carefully define your terms.

What questions should you ask before paying off a loan?

Before you accept the lender’s offer to settle your loan, you must request that the account be closed and not settled. Before completing the payment, you can work with the bank to resolve any outstanding issues, such as late payments. Request a chargeback so that the disputed default or late payment transaction can be temporarily reversed.

Before terminating the account, you must also have proof of payment. Request from the lender a “no-dues certificate.” This will aid you in disputing any erroneous information provided by the lender in the future

How can I raise my CIBIL score once a loan is paid off?

Although paying off the loan account will reduce your monthly EMI burden, your poor credit score will continue to hound you for a long time.

You must now take strict control of your financial condition and take appropriate efforts to raise your credit score. Let’s look at ways to swiftly increase your CIBIL score after a loan settlement.

  1. Establish a positive track record.
  2. Pay off all outstanding debts 
  3. Keep track of your credit cards 
  4. Apply for a secured credit card
  5. The usage of credit
  6. Never inquire about a loan.
  7. Strive for excellent credit scores.

It is more difficult to obtain an unsecured loan with a poor credit score than it is to obtain a secured loan. If you do require cash despite your low credit history, make sure you apply for a Secured Loan and have a repayment plan in place. To acquire a low-interest loan, consider enlisting the help of a guarantor or knowing how to increase cibil score.

 

By Arslan Shah

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