Mr Niranjan works in a reputed firm with a decent salary. He is a regular credit card user and has acquired consumer durable loans for various purposes. Not only this, but he also keeps on applying for personal loans from time to time. Now, he aspires to buy the house of his dreams for his family. Since he was successful in repaying the previously taken loans on time, he was so confident that his home loan application would not get rejected.

So, the next day, he applied for a home loan. However, he was surprised to know that his application for the same has been rejected. Having discussed with the bankers, he got to know that his loan application was rejected due to the presence of the remark "settled" on his credit report.

Niranjan was someone who considered the remark of "settled" as a positive remark. Only after getting his loan application rejected, he understood that the status of "settled" is different from that of "closed".

There might be many like Niranjan, who may mistake a negative remark in their credit report for a positive one. Therefore, it becomes important to understand these remarks before they cause any hindrance in getting your loan or credit card application sanctioned. Also, if your credit report shows any such remark, you can take proper measures to get rid of these remark (s) prior to applying for the desired credit.

In this article, we will focus on familiarizing you with the two most common negative remarks that are often mistaken for positive ones. Also, we will be providing you with the solution to eliminate these negative remarks from your credit report. So, make sure to read the article till last! 

1. SETTLED

If you have ever come across this remark in your credit report, you must be knowing how unfavourable it can get for you. And, the same thing happened with Mr Niranjan when he applied for the home loan i.e., his loan application got rejected. Now, let us first understand what exactly leads to the remark of "settled" in your credit report with the example of Mr Niranjan.

Initially, Mr Niranjan was quite consistent in paying the EMIs for his loan. However, due to some financial crisis, he was unable to pay for the EMIs after reaching a certain point. Now, he was constantly being approached by the bankers for the repayment of the loan, which further added more to his anxiety. Finally, he decided to go for a loan settlement.

WHAT IS LOAN SETTLEMENT?

In this process, the borrower informs the bankers that he's not in the situation to pay off the entire loan. Depending on the bankers, he receives a waiver of some percentage on the total outstanding amount and pays the remaining amount.

Though the borrower now no longer owes anything to the bankers, his credit report will still show the status of "settled" and not "closed" since he failed to pay off the loan entirely.

Therefore, it is important to understand that settling your loan account will surely lessen the financial burden on you but it will not help you acquire the status of "closed" against your loan account, since you are making a settlement for your loan rather than paying off it in full.

Mr Niranjan was not aware of the impact of loan settlement earlier and it was only because of the remark of "settled" on his credit report that his home loan application was instantly rejected by the bankers.

2. WRITTEN-OFF

Another negative remark that risks your credit health is "written-off". When a borrower fails to make any EMI on the outstanding debt for a period of more than 180 days, the lender considers it as an inactive credit account and your credit report acquires the status of "written-off".

Now, whether you fail to pay off the total outstanding amount (including the interest amount) or just the principal outstanding amount (excluding the interest amount), your credit health will get affected in both these cases. And, when a lender will see the status of "written-off" in your credit report, it will become extremely challenging for you to avail the future borrowings. Therefore, it becomes important to get rid of this status from your credit report.

Why is it important to get rid of negative remarks on your credit report?

By now, you must understand that there's a direct link between your past credit behaviour and the sanctioning of your future loan applications. The presence of negative remarks on your credit report demonstrates your inconsistent and reckless behaviour towards your credit. In such a situation the lender will be reluctant in sanctioning your loan application and in case the application gets sanctioned, the rate of interest would be high.

Therefore, to become creditworthy, it becomes necessary to eliminate the remarks like "settled" or "write-off" from your credit report. Now, it is not something that will happen in a day. It is a gradual process, which requires you to take corrective measures to remove these remarks.

THE SOLUTION - How can you get rid of these remarks?

To remove the remark of "settled" or "write-off" from your credit report, consider paying off the outstanding amount in full. Once you are done with paying off all your dues, your lender will inform the credit bureaus and the status of "settled" or "write-off" will be changed to "closed" in your credit report.

In case you are unable to pay off the outstanding amount in full, connect with your lender and try to reach a settlement amount. This settlement amount will be lesser than what you actually owe to the lender. As soon as you pay this settled amount, the lender will notify the credit bureaus and the status of "write-off" will be changed to "settled". Though "settled" is not a positive remark, it's still considered better to have a credit report with the status of "settled" than "written-off".

CONCLUSION