Loan Written-Off Meaning - How to Remove it from Credit Reports

Your Credit Information Report (CIR) shows the status of your credit accounts, including ‘Written-Off’ and ‘Settled’. These statuses can lower your eligibility for loans and credit cards, staying on your report for a longer time. Inaccurate reporting or fraudulent activity can also cause these statuses. It’s therefore important to know how to remove them from your CIBIL report.

• Written-Off Status indicates that a lender has deemed the loan irrecoverable, and it can negatively impact your credit score.

• To remove the written-off status, start by obtaining your most recent CIBIL report and checking for discrepancies.

• Contact your lender to clarify the outstanding amount and discuss repayment options.

• A No Dues Certificate (NOC) is crucial after repayment to prove that the loan has been fully settled.

• Raising a dispute with CIBIL may be necessary if the lender doesn’t update your status within the expected timeframe.

• The written-off status may remain on your report even after the loan is cleared, but the updated status will reflect the current standing

If your CIBIL report shows a ‘Written Off’ status against a loan or a credit card, it means that you haven’t repaid the outstanding amount in full. This typically happens after more than 180 days of non-payment.

When this happens, the lender removes (or “writes off”) the unpaid loan amount from its books but you still remain legally liable to repay it. The lender then reports this default to TransUnion CIBIL.

At this stage, the lender may offer you a one-time settlement, where you pay a mutually agreed reduced amount to close the account. Once you do so, the status changes from ‘Written Off’ to ‘Settled’.

Impact of ‘Written Off’ or ‘Settled’ Status

• It can reduce your CIBIL score by 50–100 points or more

• It reflects poor credit management, making lenders hesitant to approve future credit

• Even if you get approved, you may have to pay higher interest rates compared to borrowers with a clean repayment record

Types of Written-Off Status

There are two common types of written-off statuses:

• Fully Written-Off

This occurs when the lender has written-off the entire loan balance, believing that the full amount will not be recovered.

• Partially Written-Off

In some cases, a partial amount may be written-off after partial payments have been made. This indicates the lender was unable to recover the full loan amount.

Both types have a similar impact on your credit report and future financial opportunities.

Here are the implications of having a ‘Written-Off’ or ‘Settled’ status:

• Impact on credit score

A written-off status can significantly reduce your CIBIL score, dropping it by 50 to 100 points.

• Difficulty in obtaining future credit

Since this status reflects poor financial management, securing loans or credit cards will be challenging.

• Higher interest rates

Even if you manage to secure credit, lenders may offer loans at much higher interest rates than normal due to the risk they perceive.

If your CIBIL report shows a ‘Written-Off’ or ‘Settled’ status, it can negatively affect your credit score and future financial opportunities. Here’s a clear, step-by-step guide on how to remove these statuses and restore your credit profile:

Step 1: Get Your Updated CIBIL Report

• Download your most recent CIBIL report

• Review the report carefully to identify any account marked as 'Written Off’

• Ensure that the 'Written Off' status is still reflected

• Note any discrepancies or errors in the report

• Keep the report handy when discussing the issue with your lender

Step 2: Verify with Your Lender

• Contact the lender directly (bank or financial institution) to confirm the outstanding amount on the loan

• If the ‘Written-Off’ status is incorrect, request them to review their records and correct the mistake

• If the loan is still pending, ask for a detailed breakdown of the dues

Step 3: Create a Repayment Plan

• If the written-off status is due to missed payments, negotiate a repayment plan with the lender

• Offer a realistic schedule for clearing the dues and show your commitment to full repayment

• In cases of older debt, work with the lender to discuss options for revising the status to ‘Closed’ once the loan is fully paid

Step 4: Repay the Outstanding Amount

• Stick to the repayment plan and ensure all dues are cleared within the agreed timeline

• Make sure to pay the entire amount to fully resolve the outstanding balance

Step 5: Request a No Dues Certificate (NOC)

• After clearing the dues, request a No Dues Certificate (NOC) from your lender

• The NOC serves as proof that the loan has been fully paid and that there are no remaining obligations

• Keep this document safe for future reference in case the written-off status is not updated on your CIBIL report

Step 6: Check Your Updated CIBIL Report

• After the repayment is processed, Review your CIBIL report and score to ensure that the written-off status has been updated to ‘Closed’

• This may take a few weeks, so be patient

Step 7: Raise a Dispute with CIBIL If Status Is Not Updated

• If the ‘Written-Off’ status is still reflected on your CIBIL report after full repayment, raise a dispute with TransUnion CIBIL

• Provide supporting documents like the NOC or proof of payment to expedite the dispute process

• You can raise the dispute online on the CIBIL website or through their customer service

The process of removing a written-off status from your CIBIL report can take anywhere from 30 to 45 days once the lender has updated their records. After you repay the outstanding balance or settle the debt, your lender must notify the credit bureau of the change, which may take some time to reflect in your CIBIL report. 

If the status isn’t updated within the expected timeframe, you can raise a dispute with CIBIL. The dispute resolution process typically takes up to 30 days. However, it’s important to note that while the status may be updated, the written-off remark can remain visible on your report for up to 7 years, though it will no longer affect your current credit standing once it’s resolved.

Getting a ‘Written Off’ or ‘Settled’ status removed from your CIBIL report can be a lengthy process. Moreover, rebuilding your credit after getting this status removed is also a gradual process. 

To avoid such issues, take these proactive steps:

1. Before applying for a loan, assess your ability to repay it

2. Research different loan options to get a loan that best suits your needs

3. Consider opting for a loan that extends low interest rates with longer repayment tenures to make your EMIs more manageable

4. Manage your budget by avoiding unnecessary expenses so you can pay all your dues on time

5. Contact the lender, explaining your issue if there is a risk of defaulting on loan repayment and generate an alternate plan