The terms settlement, default and closed are commonly found in credit reports and it is important that you know what they mean so that you understand your credit history accurately.
Here are their definitions within the context of loans and credit:
- Settlement – An official agreement in which the borrower has repaid a portion of their dues and the lender agrees to not pursue them for the remaining balance.
- Default – The borrower has failed to fulfill their obligation to pay a debt.
- Closed – The borrower has paid the debt in full.
As a loan company we look for these terms in every applicant’s credit report. We do loan to applicants who have defaults and settlements in their credit history, but consider them higher risk. We naturally prefer to loan to those who have a history of closing debts.
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