Settling a credit card bill can offer temporary relief but leave a lasting dent in your credit report. A credit card settlement usually indicates that you paid less than the total due, which is flagged as a negative mark by credit bureaus. This directly impacts your CIBIL score, making it harder to get new loans or credit cards in the future.
But the good news is that your CIBIL score isn’t a permanent number. You can rebuild it—step by step—by adopting the right strategies and being consistent. With simple language and clear actions, let’s explore the most innovative ways to improve your CIBIL score after a settlement.
Understand What a Credit Card Settlement Means
Before we look at recovery, it’s essential to know what settlement means in the world of credit.
When you settle a credit card account, you agree with your bank to pay less than you owe. For example, if you owed Rs. 1,00,000 but the bank accepted Rs. 60,000 as the final payment, that is a settlement—not a full repayment. This gets reported to CIBIL as “settled” instead of “closed,” and this status is a red flag for lenders.
This lowers your CIBIL score by 75 to 100 points (or more, depending on your previous score), and it can stay on your report for up to seven years 1.
Step 1: Get a Copy of Your Latest CIBIL Report
Start your recovery journey by checking where you stand. Get a detailed credit report from CIBIL through their website or other platforms like Paisabazaar, BankBazaar, or the official TransUnion CIBIL portal.
Look for:
- The status of the settled account
- Other credit cards or loans listed
- Any errors in the report
If you see a wrong entry, raise a dispute with CIBIL immediately. Even a small error can affect your score.
Step 2: Repay the Settled Amount Fully (If Possible)
This is one of the most effective ways to turn things around.
Even if the account is already marked as “settled,” you can contact the lender and repay the remaining amount. Request them to update the status from “settled” to “closed.” This shows that you took full responsibility and cleared all dues.
Banks may take a few weeks to update the status, but once it changes to “closed,” your CIBIL score will slowly improve.
👉 A “closed” status looks far better than a “settled” one to any lender reviewing your profile.
Step 3: Get a Secured Credit Card and Use It Responsibly
Once your finances stabilize, apply for a secured credit card. These are offered by many Indian banks against a fixed deposit, usually starting at Rs. 10,000.
Benefits:
- Easier approval despite a low score
- Helps build a positive repayment history
- Low risk of default
Use this card to make small monthly purchases, and always pay the full amount on time. This steady activity builds a positive track record, increasing your score monthly.
Recommended banks offering secured cards:
- SBI Card Unnati
- ICICI Bank Coral Credit Card against FD
- Axis Bank Insta Easy Card
Step 4: Avoid Applying for New Loans Too Soon
When rebuilding your score, it’s natural to want new credit, but too many loan or credit card applications can hurt more than help.
When you apply, a hard inquiry is made into your credit report. Multiple inquiries within a short time make you look credit-hungry and lower your score even further.
Instead, wait 6–9 months of on-time payments and score improvements before applying for fresh credit. Use this time to build trust with the system.
Step 5: Pay All Existing Dues on Time
This cannot be stressed enough. The single most significant factor in your credit score is payment history.
If you have:
- Active EMIs
- Utility bills
- Other credit cards
Then, pay on or before the due date every single month. Even one missed payment can set you back. Use auto-debit or reminders if needed, but make punctuality a habit.
Over time, consistent payments rebuild your trust level with credit bureaus.
Step 6: Keep Your Credit Utilisation Low
If you’re using a credit card again, never max it out. The ideal usage is below 30% of your credit limit.
For example, if your card limit is Rs. 50,000, keep spending under Rs. 15,000. Low usage shows that you’re not overly dependent on credit, which helps improve your credit profile.
Step 7: Increase Your Credit Limit Over Time
Once you use a credit card responsibly and your score rises slightly, request that the bank increase your credit limit. This can be done after 6–12 months of clean usage.
A higher credit limit helps reduce your credit utilization ratio, even if your spending remains unchanged. That ratio plays a big part in how creditworthy you appear.
Step 8: Keep Your Old Credit Accounts Active
Many people close old accounts after paying off loans or credit cards. But doing this can lower your score because credit history length also matters.
Keep your old accounts open and in good standing. They add weight to your credit history and support score growth even if you don’t use them much.
Step 9: Track Your CIBIL Score Every Month
You should regularly check your CIBIL score using trusted platforms like:
- CIBIL’s official site (TransUnion)
- Paisabazaar
- OneScore
- Paytm or PhonePe apps
This helps you measure your progress and stay on track. You’ll also receive early warnings of any new issues or errors.
Step 10: Build Other Positive Credit Activity
In addition to credit cards, you can build positive credit activity by taking small consumer durable loans, buying now-pay-later services, or using secured personal loans. The goal is not to borrow heavily but to show that you can repay responsibly.
Options include:
- EMI-based purchases on Amazon/Flipkart
- Small personal loans from fintech apps
- Gold loans from trusted NBFCs
Ensure that you repay everything on time to boost your credit score further.
Final Thoughts
Improving your CIBIL score after a credit card settlement is difficult, but it is possible. The process may take 12–24 months, depending on your consistency. You can regain control over your credit future by combining smart repayment habits, limited credit usage, and secure credit-building tools.
Remember: A good credit score opens doors to better interest rates, faster approvals, and more substantial financial confidence.
