How to Re-establish Your CIBIL Score After Loan Settlement
Settling a loan can bring relief, but it often raises concerns about your CIBIL score. Many borrowers face harassment from banks and financial institutions over loan repayments, even after a loan settlement. If you’ve experienced unfair treatment from banks and need help protecting your financial rights, understanding how to rebuild your credit score is crucial.
How Loan Settlement Affects Your CIBIL Score
A loan settlement occurs when a borrower negotiates with the bank to pay a reduced amount instead of the full outstanding loan. While this can ease financial pressure, it is reported to credit bureaus as a “settled” or “written-off” account. This lowers your CIBIL score and makes it harder to secure loans in the future. However, this impact is not permanent. With the right steps, you can rebuild your creditworthiness.
Steps to Improve Your CIBIL Score After Loan Settlement
Restoring your credit score requires discipline and smart financial habits. Here’s how you can recover after a loan settlement:
1. Make Timely Payments
Ensure that you pay all remaining loans, credit card bills, and EMIs on time. Even small delays can further harm your CIBIL score. Setting up auto-payments can help maintain a consistent payment record.
2. Keep Credit Utilization Low
If you use credit cards, keep your spending below 30% of your available limit. High credit utilization signals financial distress and can delay your credit score recovery.
3. Use a Secured Credit Card
If banks deny you a regular credit card after a loan settlement, applying for a secured credit card backed by a fixed deposit can help rebuild your credit history.
4. Avoid Applying for Multiple Loans
Frequent loan applications can make banks see you as a high-risk borrower, leading to more rejections. Instead, focus on improving your CIBIL score before seeking new credit.
5. Check Your CIBIL Report for Errors
Many borrowers face unfair reporting practices by banks, which can wrongly impact their CIBIL score. Regularly reviewing your credit report helps you identify and dispute incorrect entries. If your score has been unfairly affected, you have the right to challenge the report.
6. Diversify Your Credit Portfolio
A mix of credit types, such as credit cards and personal loans, can demonstrate responsible financial behavior. However, don’t rush into new credit unless necessary.
7. Seek Legal Help for Bank Harassment
If you are facing threats, constant calls, or pressure from banks even after a loan settlement, you have legal rights. Banks must follow fair recovery practices, and harassment is not allowed under RBI guidelines.
Know Your Rights Against Bank Harassment
Many borrowers face aggressive recovery tactics from banks, including excessive calls, threats, and public shaming. If you have settled a loan and continue to face harassment:
- File a complaint with the bank’s grievance redressal cell.
- Report to the RBI if the bank violates fair recovery practices.
- Consult legal experts who specialize in bank harassment cases.
Conclusion: Take Control of Your Financial Future
A loan settlement may lower your CIBIL score, but it does not define your financial future. By maintaining smart credit habits, monitoring your credit report, and standing up against unfair bank practices, you can regain financial stability and protect your rights. If you are experiencing bank harassment even after settling a loan, seek professional assistance to ensure fair treatment.
