FICO Shares Jump as Direct Licensing of Mortgage Scores Disrupts Credit Bureau Model
NEW YORK, Nov 21 - Shares of FICO surged as much as 14% Tuesday after the company announced it will directly license its mortgage credit scores to lenders, bypassing traditional credit bureaus Experian, Equifax, and TransUnion. The move sent shares of the major credit bureaus tumbling,with Experian down over 7%,Equifax down nearly 6%,and TransUnion down more than 5% in midday trading.
The shift marks a important disruption to the decades-old system where lenders rely on credit bureaus to provide scores. FICO’s direct licensing allows for greater control and possibly lower costs for lenders, while simultaneously challenging the credit bureaus’ dominance in the mortgage market. This advancement arrives as the mortgage industry seeks greater efficiency and transparency in credit assessment, and could reshape the competitive landscape for credit data and analytics.
FICO will begin offering its FICO Score 10 T mortgage score directly to lenders in the first half of 2024. The company believes this will provide a more accurate and consistent risk assessment for mortgage applicants.
“This is a natural evolution for FICO, allowing us to deliver the value of our scoring technology directly to our customers in the mortgage market,” said Sally Wang, FICO’s senior vice president of scoring solutions, in a statement. “Direct licensing will streamline the process and provide lenders with greater versatility.”
The credit bureaus have historically profited from licensing credit reports and scores to lenders. By cutting them out of the equation for mortgage scores,FICO is impacting a key revenue stream. Experian, Equifax, and transunion all offer competing mortgage credit risk scores.
Reuters reporting by Manya Saini and Arasu Kannagi Basil.
