Loan settlement can provide financial relief when you’re drowning in debt. However, one of its major downsides is the impact it has on your credit score. If you’ve recently settled a loan and are now wondering how to bounce back, this guide will help you understand the steps to rebuild your credit health.
Understanding the Credit Score Drop
When you opt for a loan settlement, the lender marks your account as “settled” rather than “closed” or “paid in full.” This indicates that you didn’t repay the loan as per the original agreement. As a result, credit bureaus like CIBIL may reduce your credit score significantly—often by 75 to 150 points or more.
Steps to Rebuild Your Credit Score
1. Review Your Credit Report
Start by obtaining your latest credit report from CIBIL. Look for inaccuracies, especially how your settled loan is reported. If the loan is wrongly listed, a loan settlement expert can help you dispute the entry.
2. Clear Remaining Dues Promptly
If you have any other active loans or credit cards, make timely payments without fail. Regular EMI payments post-settlement show credit responsibility.
3. Avoid New Loans Immediately
Don’t apply for new loans right after settling one. Multiple loan inquiries can further lower your score. Wait at least 6-12 months while you work on improving your profile.
4. Use a Secured Credit Card
Consider getting a secured credit card backed by a fixed deposit. Use it for small purchases and pay the full bill before the due date. This helps build positive repayment history.
5. Consult a Loan Settlement Expert
Partnering with a loan settlement expert can help you develop a financial strategy tailored to your situation. At Guardian Financial Experts, we don’t just assist in negotiating settlements—we also help clients rebuild their financial credibility.
Conclusion
While the loan settlement process can give short-term relief, it’s crucial to focus on long-term recovery. By following the steps above and getting the right professional support, you can gradually rebuild your creditworthiness. For expert guidance tailored to your situation, Guardian Financial Experts is here to help.