Written by: Internal Analysis & Opinion Writers
Shares of Fair Isaac Corp. (FICO), the company behind the widely used FICO credit score, fell sharply after a major shift in the credit scoring landscape. The drop came after Fannie Mae and Freddie Mac announced they would begin accepting the competing VantageScore 4.0 credit model, ending FICO's long-standing exclusivity in government-backed mortgage underwriting.
The policy change, issued under the oversight of the Federal Housing Finance Agency (FHFA), is designed to introduce more competition into the credit scoring market. FHFA Director Bill Pulte stated the move was aimed at improving consumer outcomes and reducing the financial burden on borrowers.
FICO’s stock plunged by nearly 15%—its steepest single-day decline in years—after investors digested the implications of the news. The sharp drop reflects concerns that FICO could lose a significant portion of its revenue from mortgage-related credit scoring services.
FICO charges a royalty each time one of its scores is used in a mortgage transaction. Recently, the company raised its per-score fee from \$3.50 to \$4.95. This increase drew criticism from lenders and regulators alike and may have accelerated the FHFA’s move to broaden the credit scoring field.
VantageScore 4.0, the alternative model now approved for use by the GSEs, was developed by the three major credit bureaus—Experian, Equifax, and TransUnion. The model incorporates alternative data, such as rental and utility payment history, and uses machine learning to generate scores for millions of consumers who previously lacked sufficient credit history.
Mortgage industry groups welcomed the potential for innovation but urged caution. They noted that switching to or incorporating a new credit score model would require operational adjustments and time for investors to gain confidence in loan pools using VantageScore.
Despite the news, many Wall Street analysts remain cautiously optimistic about FICO’s future. Some argue the company's dominant brand recognition, deep integration with mortgage underwriting systems, and continued presence in other lending verticals will limit the impact of this development over the long term.
FICO responded to the announcement by reaffirming the strength and reliability of its scoring model. Company leadership stressed that the predictive accuracy and trust built around FICO over decades won’t be easily replaced, even as new options become available to lenders.
Still, analysts acknowledge that the GSE decision introduces uncertainty. If lenders or investors gravitate toward VantageScore to reduce costs, FICO may need to adjust its pricing structure or develop new scoring models to maintain its competitive edge.
In the near term, the credit scoring ecosystem may become more fragmented, with lenders evaluating which models deliver the best predictive power while meeting regulatory standards. For consumers, the change could expand access to credit, particularly for those previously excluded from the mortgage market due to limited credit history.
FICO also continues to invest in next-generation credit scoring solutions. One upcoming update includes factoring in buy-now, pay-later (BNPL) transactions—an area of growing relevance in consumer credit behavior that both FICO and VantageScore are racing to incorporate into their platforms.
For now, the FHFA's decision signals a turning point in the mortgage finance system. As lenders and investors adapt to this expanded credit scoring landscape, FICO will face new challenges—and opportunities—in maintaining its leadership.
