FICO just upended the credit score market

A magic number that can determine whether you’ll be a homeowner will be sent to mortgage companies without intermediaries.

Fair Isaac, the company that creates FICO credit scores, announced yesterday that it’ll offer them directly to the lending industry, eliminating the need for credit reporting agencies Experian, Equifax, and TransUnion in the transactions. The trio’s stocks were down 4.3%, 8%, and 11% at market close, respectively.

Sidelined

Fair Isaac’s shares rallied over 18% as it moved to loosen the credit bureaus’ grip on the mortgage process:

• The three companies specializing in detailed credit reports currently resell FICO scores with a markup to firms supplying compiled credit reports to lenders. The change could diminish their profit by as much as 15%, according to Jeffries.
• But starting now, Fair Isaac will license FICO scores directly for a flat $10 fee whether or not a loan is closed, or a $4.95 fee plus a $33 fee if a loan is inked, which it says will make an average score pull 50% cheaper for industry players—savings that could be passed on to homebuyers.

It’s a bone for regulators…that comes after Federal Housing Finance Agency Director Bill Pulte accused Fair Isaac of monopolizing the credit score industry. Earlier this year, the agency let government-backed lenders use credit scores from FICO’s rival, VantageScore—which was created by the three credit bureaus.—SK