tl;dr
Fair Isaac Corp (FICO) sees 23% stock surge after announcing direct sales of credit scores to lenders, disrupting traditional credit bureaus and sparking industry-wide shifts.
**FICO's Direct Sales Move Sparks Stock Surge and Industry Shift**
Fair Isaac Corp (FICO), the credit scoring giant, saw its stock surge 23% on Thursday after announcing a strategic shift to sell its credit scores directly to mortgage lenders and resellers, bypassing traditional credit bureaus. The move has sent shockwaves through the industry, triggering sharp declines in shares of major credit bureaus Experian, Equifax, and TransUnion, as investors worry about eroding revenue streams.
FICO’s new distribution model aims to cut out intermediaries, allowing lenders to access scores at a lower cost. Analysts at Raymond James noted that this could eliminate the “100% markup” credit bureaus currently charge for FICO scores, potentially saving lenders millions. The FICO score, used by nearly 90% of U.S. lenders to assess borrower risk, is central to mortgage decisions. By offering direct access, FICO claims the change will boost competition and transparency in pricing.
The move has drawn praise from Federal Housing Finance Agency Director Bill Pulte, who hailed FICO’s “creative solutions” for consumers on social media. However, Pulte had previously criticized FICO over pricing, pushing for the adoption of rival models like VantageScore. The recent shift appears to address those concerns, with analysts suggesting it could stabilize FICO’s pricing power amid growing competition.
Credit bureaus, which have long profited from licensing FICO scores, face significant risks. Jefferies analysts warned that the new model could reduce their earnings by 10% to 15%, forcing them to compete directly with lenders. Experian, Equifax, and TransUnion saw their stocks drop sharply on Thursday, with Equifax and TransUnion falling 8% and 10%, respectively. None of the bureaus immediately commented on the development.
FICO’s CEO, Will Lansing, emphasized that the change would “eliminate unnecessary markups” and empower lenders to choose pricing models. While the company stressed that traditional distribution channels would remain open, the shift signals a broader industry trend toward cost reduction and innovation.
The Mortgage Bankers Association cautiously welcomed the move, calling it a “step in the right direction,” but noted that its impact on mortgage costs remains to be seen. Meanwhile, FICO’s stock hit a five-year high, potentially reversing its annual losses. As the credit scoring landscape evolves, the battle between FICO, credit bureaus, and emerging models like VantageScore is set to intensify, reshaping how lenders evaluate risk and consumers access credit.