The Financial Conduct Authority (FCA) has issued a stark warning to UK consumers, revealing that approximately 1.5 million households may be squandering money on credit-boosting schemes that fail to deliver meaningful results.
How the Schemes Operate and Their Costs
These services, which typically charge monthly fees ranging from £2.50 to £25, focus on reporting routine payments to credit reference agencies. However, the FCA's investigation found they often operate outside regulated credit frameworks, with their primary aim being to artificially boost credit scores.
Alison Walters, the FCA’s Director of Consumer Finance, stated: "We urge people to think twice before paying to use products that claim to boost your credit score. We found that certain types of credit building products don’t always deliver on their promises."
Vulnerable Customers at Serious Risk
The financial watchdog identified significant risks for vulnerable consumers, noting these products frequently target individuals with little or no credit history. The FCA's review concluded that these methods are largely ineffective, with little evidence supporting their claims to genuinely improve credit ratings.
As a direct result of the FCA's involvement, five companies have now withdrawn their credit-building products from the market, protecting consumers from further potential harm.
Free and Effective Alternatives Available
Instead of paying for these schemes, the FCA is directing households toward the government-backed MoneyHelper website, which offers free, impartial guidance on debt support and credit advice. Walters emphasised there are "usually better, more cost-effective ways to build up your credit" than using these paid services.
Consumers concerned about their credit status are encouraged to seek out these free resources rather than investing in products that may provide minimal benefit for significant cost.
