FICO to Directly License Credit Scores to Mortgage Resellers

Core Insights - Fair Isaac Corp. (FICO) is launching a program to sell credit scores directly to mortgage resellers, which is expected to enhance price transparency and reduce costs for mortgage lenders and brokers [2][4][5] - The announcement has led to a significant drop in shares of credit-reporting bureaus TransUnion and Equifax, each falling over 8%, while FICO shares surged by 32% intraday, marking its largest gain on record [3][5] - The move is seen as a step towards ensuring a competitive market, as it allows lenders to consider alternative credit scoring methods, potentially reducing reliance on traditional FICO scores [4][6] Company Impact - FICO's new program is anticipated to be beneficial for the company, as analysts suggest it will stabilize costs for homebuyers and mortgage originators while enhancing FICO's market position [5] - Citigroup analysts noted that Equifax reassured investors about maintaining profitability in the mortgage sector despite the competitive pressure from FICO's new initiative [5] Industry Dynamics - The shift in credit score distribution is expected to create a more competitive environment in the mortgage industry, with Fannie Mae and Freddie Mac also allowing the use of VantageScore, further diversifying credit assessment options for lenders [6]