FICO has fired its latest shot in the credit scoring wars, launching a direct license program that promises to slash costs for lenders by cutting out credit bureau markups. But not everyone is convinced the move will upend the system.
"The National Consumer Reporting Association’s reseller members support competition and lower costs for American homebuyers. FICO’s announcement on score delivery this week may offer some relief, but more thorough review is needed," said Eric Ellman, President of the National Consumer Reporting Association (NCRA)."The cost of credit reports and scores have increased significantly in the last few years, and that is a point of concern for NCRA members, who are price-takers, not price-makers. However, the cost of credit information is still less than 1% of closing costs."
Paul Oster, founder and CEO of Better Qualified, LLC, says the announcement is less a bold disruption than a defensive maneuver against mounting regulatory and market pressure.
Cutting Costs, Shifting Models
The new Mortgage Direct License Program allows tri-merge resellers to calculate and distribute FICO Scores directly to lenders, bypassing the credit bureaus. The initiative comes with two pricing models: a performance-based structure with a $4.95 royalty per score — which represents about a 50% reduction compared to current average reseller fees — and a $33 “funded loan fee” per borrower per score. The second option is a traditional per-score model at $10.
FICO has positioned the program as a way to eliminate “unnecessary markups” and provide lenders with transparency and choice. “Today marks a turning point in how credit scores are delivered and priced across the mortgage industry,” said Will Lansing, Chief Executive Officer 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.”
FICO will also offer both FICO mortgage score pricing models to the three nationwide credit bureaus on the same terms, though FICO does not control any pricing mark-ups the bureaus may impose in their channels.
The FICO® Score is used by 90% of top U.S. lenders, according to the FICO press release.
“This is a defensive move by FICO, the monopoly that’s controlled the credit scoring model for decades,” Oster said in an interview with NMP. “They saw the writing on the wall years ago.”
Policy Pressure And The VantageScore Challenge
Oster points to long-simmering policy changes as the catalyst. “If you remember, President Trump signed the Credit Score Competition Act in 2018,” he explained. “That required the Federal Housing Finance Agency [FHFA] to establish a new process for Fannie and Freddie to validate more advanced credit score models. We all know what that means — because there’s only one other model, and that was the VantageScore. FICO saw the writing on the wall back then.”
With the FHFA’s recent audit confirming that Fannie and Freddie can use a bi-merge credit reporting model instead of the traditional tri-merge, Oster believes the financial stakes for FICO are enormous. “That would cut FICO’s profits by a third immediately,” he said. “And now you introduce the VantageScore model into the mix, and FICO’s feeling the pressure right now.”
The FICO-Bureau Standoff
Despite FICO’s announcement, Oster warns that the credit bureaus remain the true gatekeepers. “He who controls the data is in control. There is no FICO scoring model without the bureau’s data,” he said. “FICO can come up with every direct licensing model they want, but if they don’t have the data, I just don’t understand it.”
That tension could set the stage for a showdown. “There’s going to be a standoff between FICO and the bureaus,” Oster predicted. “The CRAs are going to get caught in the middle, and lenders will have to choose which model they want to adopt.”
More Competition, More Questions
While skeptical of the mechanics, Oster sees potential upside for consumers. “A bi-merge report will create better competition between the bureaus,” he said. “The government goes through a lot of pain and suffering trying not to let companies create monopolies. There’s been one monopoly in the FICO score model for decades, and we allowed it for far too long. So I think this is a move in the right direction.”
Still, the long-term impact hinges on how bureaus and regulators respond. “The credit bureaus are very powerful companies with tremendously powerful lobbyists in D.C.,” Oster cautioned. “They’re not going to sit around and watch their revenues get crushed. Something will come out of this for sure.”
The Bigger Picture
For Oster, the larger question is whether the system itself needs a deeper overhaul. “All the data to make a decision on a mortgage is already out there — income, bank accounts, payment history, even utility bills,” he said. “It should be clear-to-close in seconds. Someone just has to figure out how to pull it all together.”
Until then, the industry faces a high-stakes standoff between FICO, the bureaus, and regulators. Whether this latest pricing shake-up delivers true cost savings or simply shifts the pressure points, remains to be seen.
