The credit building industry is hot right now. Pick any fintech conference and you’ll find half a dozen new products promising to help consumers build credit faster, easier, and with less risk than ever before. But here’s the uncomfortable question everyone’s dancing around: are these products actually teaching people how to use credit, or are they just manufacturing scores?

I spent the past few weeks talking with people across the credit building ecosystem, from traditional credit builder lenders to new rent-reporting startups to the credit bureaus themselves. What I found is a fundamental disagreement about what credit building should even accomplish, and whether innovation has gone too far in eliminating the very risk that makes credit scores meaningful.

The Traditional View: Risk Is the Point

Chris LaConte, Chief Strategy Officer at Self, doesn’t pull punches when it comes to newer credit building products. “There’s a huge difference in how these products operate,” he told me. “Some are created to manufacture a score and generate revenue, and ultimately consumers end up with a worse outcome because they get into a product they aren’t ready to handle.”

Self has been around since 2015, offering what LaConte calls “traditional financial products” that have simply been made easier to access. Their credit builder account is a CD-secured installment loan, a product that’s existed for decades. Their secured credit card works exactly like the secured cards offered by Capital One, Discover, and Citi. The key difference? “If you don’t make a payment, we are going to report to the Bureau that you didn’t make a payment,” LaConte explained. “The product has not been created to make sure that you can’t miss a payment.”

This might sound harsh, but LaConte argues it’s essential. “Our products are designed to help you understand credit today so you’re successful tomorrow. To do that, you have to have risk in your product.”

He pointed to what he calls “reporting as a service” products as examples of what not to do. These are credit lines where you can only spend $5 or $10 to report the line to bureaus, with utilization kept artificially low and payments automatically handled. “You have 100% payment rates because it’s five bucks, and utilization is basically zero. Your score is going to go up. But what are you learning?” he asked. “When you get your next credit product from a real bank, they’re not guaranteeing anything.”

Chime’s perspective aligns with this philosophy of real consequences. Their secured credit card reports payment behavior to all three major bureaus. “On-time and missed payments are reported to the three major credit bureaus, in alignment with the guidelines they established for these products,” a Chime spokesperson told me. After eight months of regular use and on-time payments, Chime members can see up to a 71-point increase in their credit score. But the key word there is “on-time.” Miss payments, and your score will reflect that reality.

Self even goes so far as to discourage their own customers from overusing their secured card. “In our UX, we have a big red line on your utilization meter at 30%,” LaConte said. “When you hit 30%, we email you and tell you to pump the brakes because if you go over that amount, your credit score could go down.” Think about that, a company making money from interchange is literally telling customers not to use their card. “I don’t think you could say that across any other fintech or maybe even any bank,” LaConte added.

The Alternative Approach: Reporting What’s Already There

One of the shortcomings of the current credit system is that consistent payment behavior on recurring bills is typically ignored. But that is changing. Christian Widhalm, whose company Bloom Credit is working with Navy Federal Credit Union and other financial institutions, ensures this payment behavior is not ignored. His product looks back 24 months at recurring payments already being made from checking accounts—rent, utilities, cell phone bills—and reports those to the bureaus.

“We don’t require the consumer to change their behavior at all,” Widhalm explained. “They’re already making these payments. When they enroll in our product, we look back 24 months in arrears in their checking account. If they’ve been paying that cell phone bill for 24 months, we make the open date on the tradeline the first recurring payment that’s been made historically.”

The result? “Within 24 hours of actually enrolling, consumers can get up to five trade lines with 24 months of history overnight, rather than putting in $500 into a secured card and hoping in 24 months that they’re going to achieve success.”

Credit Karma’s Credit Spark product operates on similar principles. “Credit Spark allows Credit Karma members to build credit history by reporting on-time payments for non-traditional payment obligations like rent, utilities, and phone bills,” said Aniva Hinduja, GM of Personal Loans & Auto Loans at Intuit Credit Karma. “Crucially, it only reports on-time payments, missed payments are not reported.” 

These products are demonstrating that someone can manage their recurring bills, which is arguably a signal of financial responsibility. But they’re eliminating the negative consequences that make traditional credit products predictive of future behavior.

Widhalm argues this is actually an advantage for financial institutions. “Come to XYZ bank, where our checking account builds your credit. The first three to four movers in the top 20 banks are going to have a serious competitive advantage for about two years with this product.” He sees it as solving a fundamental problem: “There has not been any meaningful innovation in checking in the last decade.”

The Bureau Perspective: Standards Matter

The credit bureaus are watching all of this innovation with a mix of interest and concern. Experian, in particular, emphasized the importance of maintaining standards. “Many credit-building solutions in the market today are not reportable under industry standards or do not provide the level of verified, risk-relevant data required for use in lending decisions,” an Experian spokesperson told me.

“Our priority is to ensure that any information included in an Experian credit report supports sound, responsible lending and delivers an accurate picture of a consumer’s creditworthiness,” they continued. “We conduct rigorous reviews of any credit-building product seeking to furnish data.”

LaConte from Self confirmed this is happening. “The bureaus started to see this and started being like, this doesn’t make sense,” he said, referring to some products that were reporting backdated open dates. “There’s some well-known fintechs and products that are out there that the bureaus are going to stop taking their data because they’ve looked at it as artificially inflating [the score].”

The challenge for bureaus is distinguishing between genuine innovation and score manipulation. Experian Boost, the company’s own product, “complies with industry standard reporting guidelines and enables consumers to add eligible positive payment history directly to their Experian credit report.” But that’s Experian’s own product, third-party providers face much more scrutiny.

The Fundamental Question: What Actually Predicts Risk?

This all comes down to a question that is fundamental to our credit ecosystem: what is a credit score supposed to measure?

If it’s measuring the ability to handle debt and make payments even when times get tough, then products without real risk or consequences seem problematic. How predictive is a payment history where it was literally impossible to miss a payment? When someone graduates from a risk-free credit builder to a real credit card, are they actually prepared for the responsibility?

“With our secured card, if you don’t qualify, you can’t get it,” LaConte emphasized. “There’s real risk, even as we look at it. And if you continue to make on-time payments, we actually give our users incremental unsecured credit on top of their secured card.” This graduation path teaches consumers progressively about managing credit.

But if the score is measuring financial discipline and consistent payment behavior, then reporting existing rent and utility payments seems entirely reasonable. Why shouldn’t consumers get credit for demonstrating they can pay their bills on time for years? Widhalm makes a compelling case: “If you’re paying your utility bill, your rent on time every month for two years, that’s a very good indicator of creditworthiness.”

Credit Karma’s Hinduja frames it similarly: “Our credit building products primarily capture and validate financial discipline and reliability. It clearly demonstrates an individual’s commitment to making scheduled payments on time over an extended period.” But I would like their product more if they reported missed payments as well as on-time.

Traditional lenders want to see that someone can manage actual credit products with actual risk. But younger consumers, particularly Gen Z, are asking why they should have to pay for the privilege of building a credit history when they’re already demonstrating financial responsibility through their existing payment behavior.

My Take: The Market Will Force Clarity

Here’s what I think is going to happen. The credit bureaus are going to be forced to make some hard decisions about what data actually matters for predicting credit risk. Some of these newer products will get shut down, at least from a bureau perspective. In fact, that’s already happening. But others will survive because they’re capturing legitimate signals about consumer behavior.

If credit scores become less predictive of creditworthiness then lenders will look to other options such as cash flow underwriting that provides a more complete picture of the current state of a consumer’s finances. This is already happening today as many lenders are incorporating cash flow data along with traditional credit data.

The credit building products that will thrive are those that strike a balance: they help consumers build credit in ways that are accessible and fair, while still providing lenders with meaningful information about creditworthiness. Self’s approach of traditional products with modern distribution makes sense. So does Bloom’s approach of reporting existing payment behavior, as long as those payments are verified and consistent.

What won’t survive are the products that are purely about gaming the system, the ones where it’s essentially impossible to fail, where the tradelines don’t reflect any real financial behavior, where the score improvement comes from manufactured data rather than demonstrated capability.

LaConte summed it up well when he said Self has “made a conscious choice to launch high efficacy, high integrity products that help people understand, build, and ultimately access credit.” That word, integrity, is going to be what separates the products that stick around from the ones that get shut down.

The credit building boom isn’t going away. As the parent of a 17 and 19 year old, I am fully aware of the need for help in establishing credit, and traditional financial institutions have failed to serve this market effectively. But as the market matures, we’re going to see a shakeout. The winners will be the companies that help consumers build real credit skills, not just higher scores. Because ultimately, a credit score that doesn’t predict actual credit behavior isn’t worth much to anyone.