In a move that's rippling through the financial world, Fair Isaac Corporation—better known as FICO—unveiled a new program on October 1 that lets mortgage lenders grab credit scores directly, skipping the usual credit bureaus altogether. The stock jumped sharply the next day, climbing over 16% to around $2,100 per share by midday trading on October 2. Indeed, this direct licensing push comes at a time when FICO's shares were already riding high, up more than 64% for the year so far.
However, the news hit competitors hard. Equifax shares tumbled about 8.1% in early trading, dropping to roughly $280, while TransUnion and Experian also saw declines of 7% and 5%, respectively. FICO's Mortgage Direct License Program promises scores at 50% lower cost, undercutting the markups that bureaus like Equifax have long pocketed as middlemen. Analysts are quick to point out how this could squeeze profits in an industry built on those intermediary fees.
The shift feels like a power play from FICO, which dominates the credit scoring space with its famous FICO Score used in over 90% of U.S. lending decisions. By going straight to lenders and resellers, FICO aims to foster more competition and transparency in mortgage pricing—or so the company claims. Yet, there's an undercurrent of tension here; credit bureaus have relied on this model for decades, and suddenly they're facing a real threat to their revenue streams. Moreover, regulators might take a closer look if this disrupts access for smaller players.
Still, FICO isn't stopping there. The firm has been expanding its AI-driven tools globally, with recent earnings showing second-quarter revenue hitting $499 million, a solid 15% increase year-over-year. Equifax, meanwhile, grapples with its own challenges, including past data breaches that still linger in investor minds.
As this unfolds, one can't help but wonder how the credit ecosystem will adapt to such direct challenges—or if it'll spark even bigger changes down the line.