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The phrase "small settlement" is correct and usable in written English.
You can use it to refer to a small area of habitation, typically with a few buildings and low population. For example, "The small settlement was nestled in the rolling hills of the countryside."
Exact(60)
The small settlement doesn't sit right.
The red roofs of Shani, a small settlement, peep through the trees.
Even after Illinois became a state in 1818, however, Chicago remained a small settlement.
But that effort never got much traction, and we quickly agreed to a small settlement.
They were centred on the small settlement of Pagan on the Irrawaddy River.
Our path ran from the small settlement of Baracconi to the old foresters' station of Caritate.
America has come a long way from a small settlement at Plymouth Rock.
In addition, Israel must take down small settlement outposts that have gone up since March 2001.
Trump's message had reached the small settlement where Díaz grew coffee.
The jury voted a small settlement in her favor, but did not agree until a verbal fight had ensued.
In 1086 the town consisted of a castle, cathedral, and small settlement, all surrounded by a wall and deep ditch.
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Since I tried Ludwig back in 2017, I have been constantly using it in both editing and translation. Ever since, I suggest it to my translators at ProSciEditing.

Justyna Jupowicz-Kozak
CEO of Professional Science Editing for Scientists @ prosciediting.com