The FCA (Financial Conduct Authority) wants to help people make better financial decisions so they can take control of their money. One of the ways it does this is through consumer education, which sits at the heart of its wider objective to ensure financial markets work well for everyone. When consumers better understand how to manage their finances, they are more likely to make informed decisions — benefiting both individuals and the market.
One area of increasing focus is credit and how consumers can improve their credit scores. The FCA has been examining how credit builder products work in practice, with a particular emphasis on whether consumers receive clear, useful information about improving their credit, including through tools such as MoneyHelper.
What Is a Credit Builder Product?
Credit builder products are designed to help people build a better payment history, which can improve their credit score over time. The FCA’s review specifically looked at products that report your regular payments to credit reference agencies (CRAs). The idea is that by showing you’re making payments on time, your credit score could go up. But, if your payments are small or inconsistent—like missing payments on credit cards—it could hurt your credit without you even realizing it.
It’s also important to know that most of these products aren’t considered regulated credit. Since they’re often marketed to people who have little or no credit history, the FCA wanted to understand how these products are affecting people.
Why Payment History Matters for Credit Builders
Your payment history is one of the biggest factors in your credit score. It influences everything from getting loans or credit cards to being able to rent a place or even getting certain jobs. So, keeping a clean payment history is super important.
What the FCA Found in Its Credit Builder Review
- Effectiveness: The FCA found that these credit builder products don’t always help improve credit scores, at least not for most people. There’s not much solid evidence that they make a big difference.
- Risks: Some of these products can give a misleading picture of someone’s financial situation. This could lead people to take on credit they can’t afford. And for people who are already struggling financially, these products are less likely to improve their credit score and might make it harder for them to pay for things they need.
- Lack of regulation: Most of these products aren’t regulated, and many companies don’t clearly explain the risks or limitations of their products, which can leave people confused.
What’s Happening Next for Credit Builder Products?
Even though credit builder products seem like they could help, the FCA’s review has made some companies rethink how they approach them. Some companies have stopped offering them altogether, while others are changing their products and how they market them. The FCA is still working with these companies to figure out the best way forward.
What Consumers Should Consider About Credit Builders
Even though credit builder products sound like a way to improve your credit score, there’s not a lot of proof they actually work in the long run. It’s important for consumers to carefully consider whether these products are right for them and if they’re worth the cost. But, in the end, staying informed about financial products is key. The more you know, the better decisions you can make for yourself and the market as a whole.
How Cosegic Can Help with Credit Builder Products
The FCA’s findings underline the need for clear communication, robust oversight, and strong product governance. Cosegic helps firms offering credit-related tools stay aligned with regulatory expectations and avoid consumer harm.
We support firms with:
- Clear, compliant product and marketing reviews
- Strengthened product governance and documentation
- Practical guidance on applying FCA expectations
- Actionable advice on responding to regulatory change
If you need to assess your product, disclosures, or approach in light of the FCA’s review, Cosegic can help you get it right.
