Debt Settlement and Your Credit Report: What to Check

Debt settlement is an agreement between a borrower and a lender to resolve an outstanding account on agreed terms. It is different from repaying the full amount under the original schedule. The effect on a credit report and future borrowing depends on the lender's reporting and the borrower's wider circumstances.

Before you agree

1. Contact the lender through a verified channel and ask for the available options.
2. Request the complete offer in writing. Check the amount, due dates, fees, conditions, and what the lender will report to credit bureaus.
3. Do not pay an intermediary based only on a promise to erase a valid debt or guarantee a score increase.
4. Keep receipts and the lender's final confirmation. Later, review the account on your credit report.

RBI's framework describes how regulated lenders handle compromise settlements; it does not mean every borrower qualifies for a settlement or that settlement improves a credit score. Consider independent financial or legal advice if the amount or consequences are significant.

Official reference

• RBI: Framework for Compromise Settlements and Technical Write-offs
• RBI Financial Awareness Messages: credit scores and reports