The credit-reporting system is under threat from a new wave of credit-building products that focus solely on reporting positive financial behavior, according to a recent WalletHub study. While these products aim to help consumers improve their credit scores, they often employ questionable tactics that can mislead both users and lenders. The study evaluated 22 popular credit-building products and found that 27% do not provide access to actual loans or lines of credit, while others allow consumers to selectively report negative information. This creates an artificial sense of security, leading consumers to believe their creditworthiness is better than it truly is. Experts warn that such practices can push consumers into unsustainable financial situations, ultimately harming small creditors and the overall lending system. To build credit responsibly, financial experts recommend using secured credit cards that encourage responsible spending and timely payments, ensuring a more accurate reflection of a consumer's creditworthiness.
Read the full article here.