How to check your CIBIL score after loan settlement?

By Admin / 06 Sep, 2025

Summary

Your CIBIL score is a 3-digit figure between 300 and 900 that indicates your creditworthiness. It assists banks and lenders in determining whether to approve your credit card or loan application. Your score is good if it’s above 750, and it improves your chances of getting credit with ease, with lower interest rates and quicker approvals.

Some parameters impact your CIBIL score. Most crucial among these is your repayment history. Timely payment of EMIs and credit card bills raises your score, but tardy or missed payments lower your score. The rest are credit usage (the percentage at which you use your credit limit), loan/credit application instances, mix of credits (secured vs. unsecured), and settlement/loans default, if any. Any mistakes, no matter how minor, on your credit report also reduce your score.

If your score drops, don’t worry—it can be corrected. A few points to increase your score are making all dues in time, keeping the usage under 30% of your limit, not applying for unwanted loans, and checking your credit report for mistakes at regular intervals. Also, wherever possible, avoid settlements of loans as they place a negative remark.

Introduction

After you’ve paid off a loan, perhaps the most important thing you can do for your financial health is to verify your CIBIL score. While most people assume that once they’ve paid a loan, that’s the end of the situation, the fact is that your financial journey hasn’t ended as yet. Your CIBIL score, which is a three-digit figure ranging from 300 to 900, plays an important role in your future approvals for loans and credit cards.

If you settle a loan, especially if it was a settlement and not a full payment, your credit score may be affected. The bank can report this to the credit agency as “settled” instead of “closed,” which will harm your score. It is therefore very important to check your CIBIL score after settling a loan. It tells you where you are financially, if there has been any negative impact on your credit report, and what else you have to do to improve it.

The good news is—you don’t have to pay for checking your CIBIL score. There are several ways to check your credit score for free of cost on the web. In fact, as per RBI rules, CIBIL (Credit Information Bureau India Limited) allows every individual to check their credit report for free once a year. Other free websites and mobile apps also let you check credit scores, though sometimes only updated monthly.

Here in this tutorial, we will guide you step by step on how to check CIBIL score for free after loan settlement, what does low CIBIL score mean, and how to fix CIBIL score. It is especially beneficial if you are about to avail home loan, car loan, or personal loan soon.

What is a CIBIL Score, and how does it work?

A CIBIL Score is a three-digit number that reflects how good or bad your credit history is. It ranges from 300 to 900, with a higher number reflecting better credit health. This score is prepared by CIBIL (Credit Information Bureau India Limited), which collects your loan and credit card repayment information from lenders and banks.

When you take a loan or a credit card and return the money within time, your CIBIL score goes up. But if you default on payments, postpone EMIs, or settle the loans with a partial payment, your score can go down. Banks verify your CIBIL score before granting you any credit card or loan to understand how much you are with money.

For example, if your score is higher than 750, banks can confidently lend to you. If your score, however, dips below 600, they will reject your proposal or charge more interest. So, your CIBIL score serves as a sort of financial report card—it signals banks whether you are a good borrower or a bad borrower.

What are the things that affect the CIBIL Score?

Your CIBIL score is derived from a mix of factors based on your payment history and credit usage. The following are the most important things that can influence your score:

Payment History:

This is the most important factor. Your score will be better if you make your loan EMIs or credit card payments on time. But missed payments, defaults, or skipped EMIs will lower your score.

Credit Utilization Ratio:

This is the amount of credit you’re using relative to your credit limit. If your credit limit is ₹1,00,000 and you’re using ₹90,000, it’s high usage. Using more than 30% of your limit regularly can harm your score.

Number of Loan/Credit Card Applications:

When you accumulate too many credit cards or loans in a brief period, you make a whole lot of “hard inquiries” on your file.

Credit Mix:

To have an even split between secured (house, car) and unsecured (credit card, personal loan) credit is optimal. Without secured credit, your credit will mature faster.

Length of Credit History:

The longer your credit history, the better the good factor. If you’ve had a credit card or a loan for years and paid it responsibly, that is good for your score.

Loan Settlements or Write-offs:

If you settle a loan for less than the amount due or if the bank writes off your loan as bad debt, it places a negative entry on your credit report and reduces your score.

At some point, inaccurate information like outstanding loans or personal information in error will appear on your credit report. These types of errors will affect your score until they are fixed.

How many points does a good CIBIL Score have?

A good CIBIL score is usually a score of 750 and higher. CIBIL scores vary between 300 and 900, and the greater your score, the more likely it is for you to get a loan or credit card. Banks and lenders will view you as a good borrower if you have a score of 750 and higher, and they will even lend money to you with lower interest rates and quicker approvals.

Here’s the easy explanation:

750 to 900 – High grade (high possibility of loan sanction)

700 to 749 – Good grade (acceptable to the majority of lenders)

650 to 699 – Fair grade (you can get a loan, but with higher interest rates)

550 to 649 – Poor grade (doubtful chances of loan sanction)

Below 550 – Very poor grade (majority of lenders will turn down your request)

Why is the CIBIL Score important for a loan or credit card?

The CIBIL score is important when you avail a loan or credit card because it reflects your creditworthiness—whether you will be able to repay the amount on time or not. Banks and lenders seek your CIBIL score before lending to you. If your CIBIL score is high (750 or above), they are more confident that you will be able to repay the loan or credit card dues without any hassle. This means you will get fast approval and lower interest rates.

Or, if your CIBIL score is bad, the lender may consider you a riskier customer. They can reject your application or provide you with a loan with a higher interest rate, so you will pay more in the long run.

So, your CIBIL score is a report card of your credit history. It makes or breaks the banks to lend you money or not. A good rating opens up better loan options for you, while a low rating can put you in a soup getting credit at times when you may be in the greatest need of it.

If the CIBIL score goes down, what are the ways to improve it?

If your CIBIL score lowers, do not worry—it can be improved through some smart and prudent steps. Here are a couple of easy ways to improve your score in the long run:

Paying your credit card dues and loan EMIs well before the due date. Timely payments leave a very good impression on your score.

Try to spend less than 30% of your credit limit. For example, if your credit card limit is ₹1,00,000, try to spend less than ₹30,000 in a month.

Taking a series of loans or credit cards within a short time can lower your score. Apply only when it is unavoidable.

Your credit report will sometimes have incorrect details or unpaid loan records. You can check your CIBIL report and dispute if there are any mistakes.

Whenever you pay less than the due sum to settle a loan, it reflects badly. Try to settle loans by paying the full amount rather than settling them.

A combination of secured loans (e.g., home or auto loan) and unsecured loans (e.g., credit card or personal loan) will make your credit profile better.

Do not close that old credit card, especially if it has a good payment history. A long history improves your score.

Even if the other party has bad credit habits, your score will also suffer. Always be on the lookout for co-applicants with a good credit record.

What is a Loan Settlement?

Loan Settlement is a process in which you negotiate with your creditor to forgive a part of the outstanding amount on your Loan by making a lump sum payment. It is an agreement that you make with your card issuer as a last resort when you see that your Loan debt is increasing.

This can happen due to many reasons, ranging from unnecessary spending to careless spending habits. When your debt increases, the interest on it also increases, which can make it difficult for you to repay the outstanding amount. If you do not see any way out of this, then you can recommend a Loan Settlement.

What documents are required to do a Loan Settlement?

Let us know what documents are required for a Loan Settlement.

1. ID Proof

Aadhar Card
PAN Card
Passport
Driving License
Voter ID

2. Address Proof

Aadhar Card (if it has the correct address)
Electricity or Water Bill
Copy of Bank Passbook or Bank Statement
Rent Agreement (if you live on rent)

3. Income Proof (if required)

Salary Slip (if you are employed)
Bank Statement (last 6 months)
Copy of Income Tax Return (ITR)
Business Documents (if you are a businessman)

4. Loan Statement

You will have to provide the Loan statement to give the correct information about your outstanding balance. The bank can also generate this statement itself, but sometimes they ask you for a copy of it.

5. Settlement Request Letter

If you are approaching the bank for settlement on your own, you will have to give a written Settlement Request Letter in which you can explain:

Why do you want a settlement?
What is your financial situation?
How much can you pay as a one-time payment?

6. Settlement Offer Letter given by the bank

When the bank agrees to the settlement, they give you a Settlement Offer Letter. Read it carefully and confirm the amount and terms mentioned in it.

What are the reasons for doing a Loan Settlement?

Below are some common reasons:

If a person loses his job, stops a source of income, or suffers huge losses in business, then it may be difficult to repay the loan on time.

There may be a shortage of money to repay the loan if the expenses suddenly increase due to a major illness or medical emergency.

Many times, a person has the burden of more than one loan, which becomes difficult to repay on time.

There may be problems in repaying the loan due to any natural disaster, accident, or any major crisis in the family.

If the interest rate of the loan is very high and there is a problem in repaying the installment, then a Loan Settlement is resorted to.

Many times, a person is not able to manage his expenses and income properly after taking a loan, which causes problems in repaying.

What to do before doing a Loan Settlement?

Below are some steps that should be followed before a Loan Settlement:

First of all, check your income, expenses, and all other debts properly. Know how much you can repay.

Before a Loan Settlement, share your problem with the bank or lender.

Sometimes, they can offer you a better solution, such as reducing the EMI or increasing the loan term.

Contact a financial advisor or expert. They can help you make the right decision and explain how a Loan Settlement will affect your credit score.

If you decide to do a Loan Settlement, read the terms and conditions given by the bank carefully. Make sure that you are not being charged any hidden fees.

Doing a Loan Settlement can reduce your credit score. This can make it difficult to get a loan in the future. Make a decision keeping this in mind.

Loan Settlement should be the last option. Before that, consider other options like refinancing, reducing EMIs, or asking family and friends for help.

How to apply for a Loan Settlement?

If you are unable to pay your Loan dues and are troubled by heavy interest rates, a Loan Settlement can be a possible solution. Under this process, the bank or Loan company can waive off part of your total outstanding amount and give you the option to make a lump sum payment (One-time Settlement). However, this can affect your CIBIL score, so adopt it only as a last option.

Step-by-step process to apply for Loan Settlement

First of all, decide that you are not in a position to pay the entire Loan dues.

Check your income and expenses and decide how much you can pay at most.

Talk to the customer care of your bank or Loan company and tell them about your current financial situation.

Ask for a settlement offer from the bank and start the conversation.

The bank will propose a settlement amount, which will be lower than your outstanding amount.

If you don’t accept this amount, negotiate with the bank and attempt to lower the amount based on your capacity to pay.

After the bank and you reach an agreement on a specific amount, ensure that you receive a written settlement letter.

It should explicitly state the settlement terms, payment dates, and other conditions.

After completing the settlement, pay the amount in full within the given time.

Get a No Due Certificate (NOC) or Final Settlement Letter from the bank after the payment.

After the settlement, make sure the bank updates the “Settled” status in your CIBIL report.

This can affect your credit score, so inculcate good financial management habits to improve it in the future.

How to check your CIBIL score for free after loan settlement?

After you settle a debt, you also need to check your CIBIL score so that you are aware of how the settlement affects your credit health. The best thing is that your free CIBIL score is available on the internet. These basic actions will help you navigate:

1. One should visit the official CIBIL website.

Visit the official Trans Union CIBIL website at www.cibil.com.

2. Click “Get Your Free CIBIL Score”

Visit the home page and search for the option titled “Get Your Free CIBIL Score.”

3. Log in or register

Beginning Users: You will have to register providing details including your name, birthdate, email address, phone number, PAN card number.

Former Users: Just log in with your credentials.

4. Verify Your Name

To authenticate yourself, respond to a few questions derived from your credit report.

5. View Your Free Credit Report.

You can view your credit record and a free one-time CIBIL score once you have been confirmed. Your report will reveal your most recent credit account score and record of loan settlement status.

What is the impact on the CIBIL score after a Loan Settlement?

A settlement can hurt your credit score. The impact can be seen in the following ways:

After the settlement process, your credit report records that you have “settled” your debt. This entry remains in your credit history for 7 years and can be viewed negatively by lenders or other creditors, which can affect your chances of getting a loan in the future.

Since a settlement means that you have not repaid the entire debt, when you try to get a new loan in the future, banks may reject your application or offer you loans at higher interest rates by looking at your credit score and report.

After settlement, if you have a Loan or other credit line, your credit limit may be reduced as creditors think you may be a high-risk customer.

If your credit score drops, it may be difficult for you to get a loan, Loan, or any other type of credit facility. This can also affect your financial stability, especially if you face a financial emergency in the future.

When you settle with your bank, you are not paying off the entire debt, but a certain amount that is less than the principal amount. This is viewed negatively by the credit bureaus, as it shows that you have been unable to repay your debt. As a result, your credit score may drop.

What are the advantages (Pros) of doing a Loan Settlement?

Let us know what the benefits of doing a Loan Settlement are:

While a settlement will bring down your CIBIL score, provided you exercise financial responsibility after the settlement and settle your other loans and bills punctually, you will improve your score over time.

In a Loan Settlement, you pay a specific sum at one time, which settles your debt entirely. It may be helpful to the people who desire to come out of debt by increasing a little money at a time.

Mental tension grows through rising debt and bank calls. On settlement, you are free from this concern, and you may concentrate on a better financial status again.

If your Loan dues have become very high, and you are unable to repay them, then a settlement can give you great relief.

When you do not pay your Loan continuously, the bank can send a legal notice to you and can also send a recovery agent.

The interest on Loans is very high, which can be up to 30-45% per annum. If you are not paying on time, the interest and late payment fees keep increasing continuously.

What are the disadvantages (Cons) of doing a Loan Settlement?

Let us know in detail what the disadvantages of doing a Loan Settlement are.

In some cases, when you go to take a loan from another bank in the future, the bank may ask you to repay the entire previous settlement amount after looking at your credit history. That is, if you had settled by paying Rs 50,000 on an outstanding amount of Rs 1 lakh, then the new bank can demand the remaining Rs 50,000 from you.

If you have settled a Loan with a bank, then the same bank can refuse to issue you a Loan again in the future.

Doing a Loan Settlement can spoil your relationship with the bank. The bank sees it as if you have not fulfilled your financial responsibilities completely, due to which you may face problems in banking services in the future.

The biggest disadvantage of a Loan Settlement is that it spoils your CIBIL score. When you settle with the bank and pay a lesser amount instead of paying the entire dues, the bank reports it in “Settled” status. This status can remain in your credit report for up to 7 years, which may make it difficult to get a loan or a new Loan in the future.

If you have done a Loan Settlement once, banks and other financial institutions may consider you a “high-risk customer”. This may cause problems in getting a home loan, personal loan, or business loan, or the bank may give you a loan at a higher interest rate.

Conclusion

Now, your CIBIL score is your identity in terms of money. It indicates how good you are with money, especially loans and credit cards. Having a good CIBIL score (usually more than 750) assists you in getting a loan or credit card at more favorable terms, like lower interest, larger loans, and faster approval. On the other hand, a poor score makes your journey in money tight. Banks will reject your loan request or impose higher interest, and that will be stressful.

There are many reasons why your CIBIL score may fall, like delaying an EMI payment, overspending on your credit limit, taking too many loans at one time, or settling loans for a lesser amount. But don’t worry, your score doesn’t last. You can improve your CIBIL score by performing little but substantial things, like paying all dues on time, being cautious while using your credit card, checking your credit report for errors regularly, and having a good mix of credit.

Also, after repaying a loan, most people worry about their credit score. But if you keep patience and are responsible for your future credit behavior, the score can become better over time. It could take a couple of months for you to experience the impact, but with determination, your score will rise once again.

Frequently Asked Questions (FAQ’s)

Que: Why CIBIL Score drop after the settlement?

Ans: When you “settled” the loan, the bank took it as a partial payment and not as a full payment. It indicates your credit behavior as poor, which drops your CIBIL Score.

Que: Does the IBIL Score increase after settlement?

Ans: Yes, if you make EMIs and bill payments timely in the future, utilize credit limit judiciously, and form new credit habits, the score will improve slowly.

Que: How is a settlement different from full payment?

Ans: Full payment implies that you have paid the entire loan or outstanding balance, whereas settlement implies that you have paid some amount as per the agreement with the bank, which is not a full payment.

Que: Can a settlement be deleted from the CIBIL report?

Ans: Once the Settlement is included in the report, it stays for 7 years. But you can attempt to change the status to “Closed” from the bank’s side, but that also varies according to the bank’s policy.

Que: How long do I have to wait for the score to pick up after Settlement?

Ans: If you have a good financial history for 6 to 12 months consecutively, the score can get better over time. But it varies with the report of an individual.

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