7 Ways Settling Debt Can Impact Your CIBIL Score

Settling debt can provide relief, but it can also influence your CIBIL score in different ways. Understanding the impact helps you make informed financial decisions.

Immediate Debt Clearance: Paying off loans or credit cards on time reduces your outstanding balance.
Possible Score Dip: Settling debt for less than the full amount may temporarily lower your score.
Improved Credit Utilization: Lower outstanding debt improves your credit utilization ratio, positively affecting your score.
Positive Payment History: Regular payments toward settled debt reflect responsible credit behavior.
Impact on Loan Approvals: Some lenders may consider settled debts during future instant personal loan approvals.
Credit Report Update: Settled accounts are marked accordingly; this can show both responsible repayment and negotiations.
Monitoring Your Progress: Regularly check CIBIL score to track improvements after settling debts and maintaining healthy credit habits.

In conclusion, settling debt can be a smart financial strategy if done carefully. By understanding its effects and monitoring your score, you can maintain a healthy credit profile and secure better borrowing options in the future.