Fair Isaac Reshapes Mortgage Credit Scoring

Fair Isaac, the company behind the widely used FICO score, saw its stock rally more than 20% on Thursday after announcing a new pricing model that allows mortgage lenders to bypass credit bureaus when obtaining credit scores.

The Montana-based analytics firm will now license FICO scores directly to mortgage resellers, enabling them to distribute scores directly to borrowers. Nearly 90% of U.S. lenders rely on FICO scores, which typically range from 300 to 850, to evaluate credit risk.

This jump marked Fair Isaac’s largest single-day percentage gain since November 22, even as shares remain down about 9% year-to-date.

Key Features of the New Model

Lenders can choose between two pricing models.
Direct licensing removes credit bureau markups, giving lenders pricing flexibility.
Fair Isaac plans to offer the same pricing terms to Experian, TransUnion, and Equifax.

“This change eliminates unnecessary mark-ups on the FICO Score and puts pricing model choice in the hands of those who use FICO Scores to drive mortgage decisions,” said CEO Will Lansing.

📉 Credit Bureaus Hit Hard

The announcement rattled shares of major credit bureaus:

Experian, TransUnion, and Equifax stocks fell between 4% and 10%.
Investors fear the move could reduce reliance on credit bureaus for FICO distribution.

Raymond James analyst Patrick O’Shaughnessy reiterated an outperform rating on Fair Isaac, noting:

“The new pricing scheme will improve FICO’s economics and could disintermediate credit bureaus from their current ~100% markup on scores.”

🏛️ Regulatory Commentary

Bill Pulte, Director of the Federal Housing Finance Agency, weighed in via X:

Called Fair Isaac’s shift an effort to “generate Creative Solutions to help the American consumer.”
Criticized past “monopoly” practices but urged credit bureaus to adopt similar constructive actions for market competitiveness.