FICO bypasses credit bureaus with new program for mortgage lenders

Fair Isaac Corp. (FICO) has launched a program allowing tri-merge resellers to calculate and distribute its scores directly to mortgage companies, effectively bypassing the three nationwide credit bureaus: Equifax, TransUnion and Experian.

The move comes amid intensified competition with VantageScore, owned by the three bureaus, following the Federal Housing Finance Agency’s (FHFA) decision to let Fannie Mae and Freddie Mac  purchase loans underwritten with VantageScore 4.0 as an alternative to the Classic FICO score.

“Today marks a turning point in how credit scores are delivered and priced across the mortgage industry,” said Will Lansing, CEO of FICO, in a statement. “This change eliminates unnecessary mark-ups on the FICO Score and puts pricing model choice in the hands of those who use FICO Scores to drive mortgage decisions.”

Under the new program, FICO will charge in a performance model a $4.95 royalty fee per score. Additionally, a $33 funded loan fee per borrower per score will apply when the loan closes, replacing previous re-issue charges, as FICO recognizes the value its scores provide to insurers, investors and rating agencies. 

For lenders sticking with the traditional per score only model, the fee remains $10 per score through tri-merge resellers, consistent with prior pricing.

FICO scores will remain available through the three nationwide credit bureaus on the same terms, though the company noted it “does not control any pricing mark-ups the bureaus may impose in their channels.” 

The company is still working with tri-merge resellers to implement the new direct license program. FICO scores are used by 90% of top U.S. lenders, it claims.

FICO said the changes align with “calls from policymakers and industry leaders to modernize credit infrastructure and promote affordability, liquidity and access in the $12 trillion U.S. mortgage industry.”

Scott Olson, executive director of Community Home Lenders of America (CHLA) said: “CHLA welcomes steps that like this to create more options for consumers and lenders, so this appears to be a good first step in addressing our longstanding criticisms about FICO’s monopolistic pricing and practices. Only time will tell, but we hope this direct license pricing will result in net savings — passed along to the borrower — and we will be watching and monitoring this as it plays itself out.”