FICO (NYSE: FICO) has announced a new program that bypasses the three major credit bureaus and enables the direct sale of the company’s credit scores to lenders.
According to the company, the FICO Mortgage Direct License Program, the mortgage credit specialists known as tri-merge resellers will now have the option to calculate and distribute FICO Scores directly to their customers, thus eliminating reliance on the credit bureaus Equifax, Experian, and TransUnion.
Under FICO’s new performance model, the royalty fee for the FICO Score will be $4.95 per score, which the company said was a 50% reduction in average per score fees into the tri-merge resellers, a reduction achieved by eliminating credit bureau mark-ups. A funded loan fee of $33 per borrower per score will apply when a FICO-scored loan is closed.
Lenders may opt to continue using the current per score only pricing model, which maintains a $10 per score fee into the tri-merge resellers, the average price previously charged by credit bureaus for the FICO score. This model is designed to represent no increase in per score fees for lenders. FICO will also offer both of its mortgage score pricing models to the three nationwide credit bureaus on the same terms, though FICO noted that it does not control any pricing mark-ups the bureaus may impose in their channels.
“Today marks a turning point in how credit scores are delivered and priced across the mortgage industry,” said Will Lansing, CEO of FICO. “Direct licensing of the FICO Score brings transparency, competition, and cost-efficiency to the mortgage lending process. 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.”
Mortgage Bankers Association President and CEO Bob Broeksmit, praised the concept of the new program, stating, “FICO’s new program – which enhances transparency and provides more options to lenders – is a step in the right direction. While it remains to be seen if this will result in materially lower costs, MBA will monitor the implementation of this new program while continuing to call for reforms that support a better credit reporting system that promotes more competition, efficiency, and lower costs for consumers.”
Bill Pulte, director of the Federal Housing Finance Agency, posted on his personal X account, “I’ve recently had productive conversations with FICO CEO, Will Lansing, and his Representatives. I GENUINELY appreciate FICO taking Constructive Criticism, which was given in the spirit of ensuring a competitive and safe and sound market, to then generate Creative Solutions to help the American consumer. While their decision is a first step, it is appreciated. I encourage the Credit Bureau’s to also take similar creative and constructive actions to make our markets safer, stronger, and more competitive. To that end, ‘Vantage Score’ should also look at ensuring they are competitive, in every way, including but not limited to costs. Thank you to all who are helping make the Market more competitive, and safer and sounder, for the benefit of the American People!”
