Washington gave mortgage lenders a cheaper credit score, and FICO lost a quarter of its value

FICO

Fair Isaac, the company behind the FICO credit score, fell 26.52% to US$617.87 last Tuesday. That was its worst day since 1989, and the shares finished the week 23.4% lower at US$661.25.

The change sounds technical, and it reaches the core of the business. On Monday, Bill Pulte, who runs the Federal Housing Finance Agency, said Fannie Mae and Freddie Mac will price mortgages off one grid. VantageScore, a cheaper rival built by the credit bureaus, joins FICO Classic on it.

Until now a VantageScore had to be 20 points higher than a FICO score to earn the same loan price. That gap gave lenders a cost reason to stay with FICO, even after it doubled its mortgage price to about US$10 a score this year.

Chart: Fair Isaac's revenue rose every year to FY2025. Its market value fell from US$47.7bn to US$14.3bn. Two scales, both from zero: revenue by financial year to September in US$m on the left, market value at each year end and on 2 October in US$bn on the right. — This story’s chart of the day.

The rival costs a tenth of that. TransUnion will keep VantageScore 4.0 at 99 US cents a score until December 2028. Rocket Mortgage, the country's largest home lender by volume, will make it the default on eligible loans from this quarter.

FICO bounced 11.69% on Thursday. Mortgage bonds still require a FICO score, Yahoo Finance points out, so many lenders may keep paying for both.

Worth pondering

how many lenders follow Rocket. I'd wait for a second big name to switch its default before judging how much of FICO's mortgage business is really at risk.

This story ran in Rescued By Friday Monday 5 October’s edition, with the market snapshot, the other two stories, the numbers and the week ahead. Read the whole edition →

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