In a move that's rattling the financial world today, Fair Isaac Corporation—better known as FICO—unveiled a new program allowing mortgage lenders to buy its credit scores directly, sidestepping traditional credit bureaus like Equifax. The announcement, effective immediately, sent FICO shares skyrocketing more than 20% in early trading, while Equifax plunged nearly 9%. It's the kind of disruption that feels long overdue in an industry bogged down by middlemen.
Indeed, FICO's Mortgage Direct License Program promises to slash costs for lenders by eliminating bureau markups. Under the new model, scores go for as low as $4.95 each—a 50% cut from typical reseller fees—or lenders can opt for a performance-based $33 per funded loan. This isn't just tweaking prices; it's a direct challenge to the power held by Equifax, TransUnion, and Experian, who have long profited from bundling and reselling FICO's own algorithms. Moreover, FICO argues this boosts transparency and efficiency, responding to years of complaints from the lending sector about opaque pricing.
However, the backlash was swift. Equifax stock didn't just dip; it cratered, dragging down peers in the process. Analysts are already buzzing about the hit to bureau revenues, which rely heavily on these intermediary roles. FICO, on the other hand, seems poised to capture more market share, building on its already dominant position in mortgage lending. The company had raised its full-year profit forecast back in July amid strong demand, and this could supercharge that momentum.
Yet, questions linger about long-term fallout. Will bureaus fight back with their own innovations, like pushing VantageScore harder? Or does this signal a broader unraveling of the credit reporting oligopoly? For now, the market's verdict is clear: FICO's gamble is paying off handsomely, at least in the short term.
As regulators watch closely and lenders adapt, one wonders how this shift might ultimately reshape access to credit for everyday Americans.