In a move that's already rippling through Wall Street, Fair Isaac Corporation—better known as FICO—unveiled a new program on Wednesday that lets mortgage lenders snag FICO Scores straight from the source, skipping the usual middlemen like Equifax. The announcement hit like a thunderclap, sending FICO's shares skyrocketing more than 16% in midday trading to around $2,100, while Equifax tumbled over 8% to below $280. It's the kind of shake-up that feels both innovative and a bit ruthless, cutting out the credit bureaus that have long profited from reselling these scores at a markup.
Indeed, FICO's "Mortgage Direct License Program" promises to slash prices by 50% per score, aiming for what the company calls greater transparency in the mortgage market. Lenders can now buy and distribute the scores directly, a change that's effective right away and targets the tri-merge resellers who bundle reports from bureaus like Equifax, TransUnion, and Experian. Moreover, this isn't just a tweak; it's a direct challenge to the established order, where bureaus have held sway over credit data distribution for decades. FICO, the pioneer behind the iconic score used in 90% of U.S. lending decisions, seems intent on reclaiming control—and the revenue stream that comes with it.
However, the fallout has been swift and telling. Equifax, still smarting from past data breaches and regulatory headaches, saw its stock dip sharply as investors fretted over lost margins on score sales, which could dent future earnings. TransUnion and Experian shares also slid, though not as dramatically, highlighting the vulnerability in their business models. FICO's executives framed this as a win for competition, but critics might see it as a power play that squeezes partners who helped build the FICO empire. By the close of trading Thursday, FICO's market cap had ballooned past $50 billion, underscoring the market's enthusiasm for this pivot.
Still, as the dust settles in this evolving credit landscape, one wonders how deeply this direct approach will reshape lending practices and whether it truly benefits consumers in the long run.