BOZEMAN, Mont. – FICO has introduced a program that lets mortgage lenders bypass working with credit bureaus, an announcement that boosted its own stock while the shares of the three credit bureaus —Experian, Equifax and TransUnion — fell.
But at least one organization is alleging the FICO announcement isn’t what it seems.
According to the company, with the FICO Mortgage Direct License Program, tri-merge resellers — mortgage specialists — can now calculate and distribute FICO Scores directly to their customers, eliminating reliance on the three credit bureaus.
“This shift will drive price transparency and immediate cost savings to mortgage lenders, mortgage brokers, and other industry participants,” FICO (Fair Isaac Corp.) said in a news release. “Firms that favor working through the credit bureaus can continue to do so.”
‘Turning Point’
According to FICO CEO Will Lansing, the launch of the program marks a turning point in the way credit scores are delivered and priced in the mortgage industry.
“Direct licensing of the FICO Score brings transparency, competition, and cost-efficiency to the mortgage lending process,” Lansing said 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.”
The company has been under pressure from the Trump administration for increasing prices for accessing FICO scores, and the FHFA has allowed lenders to use rival VantageScore for government-backed mortgages.
Not Everyone Supports Move
The Consumer Data Industry Association issued a statement saying FICO’s program represents a “significant price increase disguised as cost-cutting, which will ultimately harm both lenders and consumers while highlighting the need for greater competition in the mortgage credit scoring market.”
“While the Direct License Program announced by FICO is positioned as a cost-cutting measure, it is simply not true,” the CDIA said. “In reality it is another price increase by FICO. With this announcement, FICO has at least doubled its publicly disclosed prices year-over-year while introducing operational costs and risk to resellers and lenders. FICO’s pricing proposal will also inevitably cause lenders to pass on significantly higher costs to consumers, especially those that are successful in securing a mortgage.
‘Ignoring Reality’
“FICO is also ignoring the reality that comprehensive data is the foundation of powerful and predictive credit scores, which help protect the health of the U.S. mortgage market,” the statement continued. “This new pricing scheme validates the need for a competitive mortgage scoring market. The combination of trended credit information and the VantageScore 4.0 score will help drive greater financial inclusion and improve the safety and soundness of the mortgage market.”
