The Financial Conduct Authority (FCA) has warned that many credit builder products fail to deliver meaningful benefits for most consumers, with some potentially misrepresenting financial circumstances and exposing people to unnecessary costs.

Following a review of the market, the regulator said it had found “little evidence” that these products – which claim to improve credit histories by reporting regular payments to credit reference agencies (CRAs) – had a significant positive impact on users’ credit scores.

The FCA said it had worked with firms and CRAs to drive improvements, with five companies now ceasing to offer such products and others amending their business models and marketing materials.

Most of the products under review were unregulated, the FCA noted, and often marketed to consumers with limited or no credit history. In some cases, firms’ reporting practices could misrepresent a customer’s financial position, making it easier for them to obtain unaffordable credit. For consumers already facing financial difficulty, the regulator warned that such products could worsen hardship by diverting income from essential living costs.

The FCA’s work did not cover other forms of credit building, such as low-limit credit cards, rent reporting services or educational tools explaining credit files.

Alison Walters, director of consumer finance at the FCA, said: “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 and there are usually better, more cost-effective ways to build up your credit, and get free and impartial guidance such as from MoneyHelper.”

The FCA said it continues to engage with firms and CRAs, including through new data reporting guidance designed to ensure that only accurate and appropriate information is shared about repayment performance.