Do you stuff your wallet with cash or prefer a card instead? Most of us prefer plastic money because it is convenient to carry and can be swiped almost everywhere these days. But if not used diligently, you can get into a mess. Read on to know more.
Missing repayment dates or making a default and the consequent negative effects on the CIBIL report, is not the only concern that has to be taken care of while dealing with credit cards. Other possible causes of credit card trouble include incorrect charges, fraudulent transactions, error in the bill, upgrading the card without consent, etc. Often it is only after we receive the bill that the issue is highlighted. Lengthy discussions and arguments with the lender follow and the issue is often unresolved for a long time.
Pay the erroneous bill or resolve the issue?
Unresolved issues are like problems swept under the carpet. They are still there and it slowly turns into a bigger problem, as time passes. The due amount on the bill keeps increasing every day. The lenders insist that the due amount must be cleared first while the client wants the error to be rectified.
The quick “solution”
As an alternative to paying the entire due amount, clients often start negotiating with the lender. Both the parties agree on a certain amount. The lender is fine with this arrangement because recovery involves cost and time and a settlement works well for them. A “settled status” is marked against the account and clients continue with their life thinking this issue is now resolved. However, that’s not the case.
What does a “settled” status mean?
picture: lace wedding dresses ukBefore we get to answer that question, it is important to know that it is different from a “closed” status. Closed essentially means that the entire loan amount has been paid off. This includes dues and other charges, if any. Whereas, settled means that a negotiate amount has been paid off and the lender has chosen to settle accounts for that amount.
Settled status is a remark on your CIBIL report.
How do future lenders read the “settled status”?
Lenders read into the “settled” status as a negative remark. And this remark is one that sticks around for a minimum period of 7 years. While lenders read CIBIL scores differently, negative remarks have the same impact. It is a reflection of the credit behavior and is taken rather seriously. Perhaps, even a sufficient reason to be denied a loan. Generally, a CIBIL score of 750 works with lenders in the absence of a negative remark. CIBIL score is calculated basis 24 months of credit history but the remark on the report reveals long term behavior. Lenders read remarks such as “settled” status of accounts as red flags which makes them rather reluctant to lend. So basically, a settled status is not going to help your case when you are looking for a loan.
Erase “settled” and “close” the loan. But how?
The “settled” status will continue to reflect as long as the dispute continues. A change in this status can only be bought about by the lender. While a dispute resolution request can be taken up with the credit bureau, one must begin parallel work on erasing the settled status. This essentially means clearing pending charges even when you are not in agreement with the lender over the due amount. Usually, lenders accept these payments and update their records accordingly. After the dues are cleared, one must ensure that the settled status has been changed from “settled” to “closed”. It takes 30-45 days from the date of payment for the changed status to reflect on your records.
A change in the CIBIL report remark from “settled” to “closed” indicates that the issue has been resolved. Now that there is no negative remark on the report, you must focus on maintaining an optimum CIBIL score. Being diligent and disciplined and taking care of these basics will ensure smooth processing of your loan application. Lenders are happy to do their job and lend when they see a clear track record, a good CIBIL score and financial discipline.
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