FICO Shares Jump as Direct Licensing of Mortgage โขScores Disruptsโ Creditโค Bureau Model
NEW โฃYORK,โ Nov 21 -โ Shares of FICO surged asโข muchโค as 14% Tuesday after the company announced it will directly licenseโ its mortgage credit scores to lenders, โbypassing traditionalโฃ credit bureaus Experian, Equifax, and TransUnion. The move sent shares of the โmajor creditโ bureaus tumbling,with Experian down over 7%,Equifax โฃdown nearly 6%,and TransUnion downโ more than 5% โฃin midday trading.
The shift marks a important disruption to the decades-old system where lenders rely on credit bureaus to โคprovide scores. FICO’s direct โขlicensing allows for greater control and possibly โlower costs for lenders, while simultaneously challenging the credit bureaus’ dominance in the mortgage market.โฃ This advancementโค arrives as the mortgage industry seeks greater efficiency and transparency in โcredit assessment, and could reshapeโค the competitive landscape for โขcredit data and analytics.
FICO willโข begin offering its FICO Score 10 T mortgage score directly to lenders in the first half โขof 2024. The company believes this willโ provide a โขmore accurate and consistent risk assessment for mortgage applicants.
“Thisโ is a natural โฃevolution for โFICO, allowing us to deliver the value ofโฃ our scoring technology directly to our customers in the mortgage market,” said โฃSally Wang, FICO’s senior vice president of scoring solutions, in a statement. “Direct licensing will โstreamline the processโ and provide lenders withโ greater versatility.”
The credit bureaus have historically profited from licensing credit reports and scores to lenders. By cutting them โout of the equation for mortgage scores,FICO is impacting a key revenue stream. Experian, Equifax, and transunion all โoffer competing mortgage credit โrisk โฃscores.
Reuters reporting by Manya Saini andโ Arasu Kannagi Basil.