In a move that's rippling through the financial sector like a sudden storm, Fair Isaac Corp., better known as FICO, unveiled a new program on October 1 that lets mortgage lenders snag their credit scores straight from the source. No more middlemen, no more hefty markups from credit bureaus. Indeed, this Mortgage Direct License Program promises to slash costs by half, charging just $4.95 per score or offering alternatives like a $10 flat fee or $33 per funded loan. It's the kind of efficiency tweak that sounds good on paper, but it's already hitting the markets hard.
FICO's stock didn't waste time reacting. Shares rocketed more than 20% on Thursday, closing out a day that saw the company valued at new heights amid analyst buzz. Needham kept its "Buy" rating intact, while Barclays bumped up its price target to $2,400 from $2,000, betting on the long-term gains from this direct-to-lender strategy. The surge feels almost inevitable, given how FICO's been dominating the credit scoring game for years, powering decisions on everything from home loans to credit cards.
However, not everyone's cheering. The big credit bureaus—Equifax, TransUnion, and Experian—watched their stocks tumble in response. Equifax, in particular, plunged about 9% in morning trading, a stark drop that underscores the threat to their intermediary role. These companies have long profited from bundling FICO scores with their data reports, adding those extra fees that now seem vulnerable. Moreover, this comes at a time when the industry faces ongoing scrutiny over data privacy and accuracy, making the timing all the more precarious for Equifax and its peers.
The shift raises questions about competition in credit scoring. FICO's play could empower lenders with cheaper access, potentially speeding up mortgage approvals in a sluggish housing market. Yet it also spotlights the bureaus' reliance on outdated models, forcing them to scramble—maybe pushing their own VantageScore alternative harder. Indeed, as the dust settles, one wonders if this direct path will truly democratize credit access or just consolidate power further in FICO's hands.