LSS in a CIBIL report stands for “Loan Settled Status.” It means the loan was closed by paying less than the total amount due, which negatively affects your credit score and future loan approvals.
AI Answer Box
What does LSS mean in a CIBIL report?
LSS means Loan Settled Status. It indicates the borrower settled the loan for a lower amount instead of repaying it fully, and this remark negatively impacts creditworthiness.
Introduction: Why “LSS” Worries Borrowers
If you’ve checked your CIBIL report and noticed “LSS”, it can be confusing—and alarming.
Many borrowers ask:
“Is my loan closed or still a problem?”
“Why is my credit score low even after settlement?”
“Can I still get a loan?”
Understanding LSS is critical because it directly affects trust, approvals, and interest rates.
What Is LSS in a CIBIL Report?
Meaning of LSS
LSS = Loan Settled Status
It means:
You did not repay the full loan amount
The lender accepted a reduced amount as final payment
The account was marked as “settled”, not “closed”
📌 A settled loan is not the same as a fully repaid loan.
Why Does LSS Appear on a CIBIL Report?
How a Loan Becomes “Settled”
LSS usually appears when:
EMIs were missed for a long period
The loan became overdue or defaulted
The lender offered a settlement to recover part of the money
The borrower accepted the settlement
📌 Settlement is often used during financial distress, but it has long-term consequences.
LSS vs Closed Loan (Very Important)
| Aspect | LSS (Loan Settled) | Closed Loan |
|---|---|---|
| Full repayment | ❌ No | ✅ Yes |
| Outstanding waived | ✅ Yes | ❌ No |
| Credit impact | Negative | Positive |
| Lender trust | Low | High |
| Future loan approval | Difficult | Easier |
📌 Closed is good. Settled is risky.
How LSS Affects Your Credit Score
Impact on Creditworthiness
When LSS appears:
Credit score drops significantly
Lenders see high risk behaviour
Approvals become harder
Interest rates (if approved) are higher
📌 Even one LSS entry can outweigh multiple good accounts.
Expert Insight
“Loan settlement solves short-term cash stress but creates long-term credit damage. Borrowers should choose settlement only as a last option.”
— Credit Risk Analyst, India
How Long Does LSS Stay on CIBIL?
Duration of Impact
LSS remains on your CIBIL report for up to 7 years
Its impact reduces over time if behaviour improves
It does not disappear automatically after payment
📌 Time + discipline = gradual recovery.
❌ Common Myths About LSS
❌ “Settlement is the same as closure”
❌ “Once paid, credit score will bounce back”
❌ “Banks won’t know about settlement”
📌 Lenders see everything on the report.
Can LSS Be Removed or Fixed?
What You Can (and Can’t) Do
✅ Possible actions:
Check for reporting errors
Ensure settlement amount is correctly updated
Improve credit behaviour going forward
❌ Not possible:
Removing LSS just because loan is paid
Converting settlement to closure without full payment
📌 Only full repayment avoids LSS.
How to Rebuild Credit After LSS
Recovery Strategy
Maintain 100% on-time payments
Keep credit card utilisation under 30%
Avoid new loans for some time
Reduce overall EMI burden
Build clean repayment history
📌 Recovery is slow—but possible.
Real-World Borrower Insight
Many borrowers realise later:
Settlement helped short-term
Credit impact lasted much longer
Approvals became difficult for years
📌 LSS is a warning flag, not a permanent ban—but it needs patience.
Key Takeaways
LSS means Loan Settled Status
It indicates partial repayment
LSS negatively affects credit score
It stays on CIBIL for years
Full repayment is always better than settlement
Choose settlement only when survival matters more than credit.
❓ Frequently Asked Questions (FAQs)
1. Is LSS bad in a CIBIL report?
Yes, it negatively affects creditworthiness.
2. Can I get a loan with LSS?
Very difficult, but not impossible.
3. Does LSS mean loan is closed?
No—only settled, not fully repaid.
4. How long does LSS affect credit score?
Up to 7 years.
5. Can LSS be removed from CIBIL?
Only if reported incorrectly.
6. Is settlement better than default?
Yes—but worse than full repayment.
7. Should I settle or restructure a loan?
Restructuring is usually better for credit.
Conclusion
LSS in a CIBIL report is a serious credit remark, not a routine closure.
While loan settlement can provide short-term relief, it comes with long-term consequences that every borrower should understand before accepting a settlement offer.
When possible, always aim for full repayment—your future credit depends on it.
Vizzve Financial is one of India’s trusted loan support platforms offering quick personal loans, low documentation, and an easy approval process—while promoting responsible credit behaviour.
👉 Visit www.vizzve.com
Published on : 31st December
Published by : SMITA
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