FICO Scores to be Directly Distributed to Consumers

Fair Isaac is introducing a new way to deliver FICO scores to the mortgage industry, allowing lenders to calculate and distribute scores directly to customers. This change is expected to impact credit-reporting firms in the US, with shares falling on the news.

The financial markets are abuzz following a groundbreaking announcement from Fair Isaac Corporation (NYSE: FICO), the developer of the widely used FICO Score. On October 1, 2025, FICO launched its "FICO Mortgage Direct License Program," a strategic initiative poised to fundamentally alter how FICO Scores are accessed and priced within the mortgage industry. This move allows mortgage lenders and tri-merge resellers to obtain FICO Scores directly from FICO, effectively bypassing the traditional intermediary role of major credit reporting agencies (CRAs) such as TransUnion (NYSE: TRU) and Equifax (NYSE: EFX).

The immediate implication for the credit reporting sub-sector of the Financials sector is a significant threat of underperformance, as a lucrative revenue stream is now directly challenged. On October 2, 2025, shares of TransUnion plummeted approximately 12.5%, and Equifax saw a decline of around 8.7%. In stark contrast, Fair Isaac's stock soared, with gains reported between 20% and 24%, reflecting strong investor confidence in its strategic pivot.

FICO's Bold Gambit: Unpacking the Mortgage Direct License Program

FICO's new program is a direct response to calls for increased price transparency and reduced costs within the mortgage industry. Under this program, FICO offers two alternative pricing models:

1. Performance-Based Model: This option features a royalty fee of $4.95 per FICO Score, representing an approximate 50% reduction in average per-score fees previously paid to tri-merge resellers. Additionally, a $33 funded-loan fee per borrower per score applies when a FICO-scored loan is closed.

2. Per-Score Only Pricing Model: Lenders can alternatively choose to continue with a per-score model that maintains a $10 fee per score into the tri-merge resellers, mirroring the average price previously charged by credit bureaus for the FICO Score.

The primary purpose of these models is to eliminate "unnecessary mark-ups" that credit bureaus traditionally added to the cost of FICO Scores, thereby driving immediate cost savings for mortgage lenders. This initiative is also seen as a response to growing regulatory pressure, including criticism from Federal Housing Finance Agency (FHFA) Director Bill Pulte, who has advocated for lower credit scoring costs and greater competition.

Winners and Losers: A Reshaped Competitive Landscape

FICO's direct mortgage pricing option creates clear winners and losers in the financial sector, fundamentally altering the competitive dynamics for credit reporting.

# Fair Isaac (NYSE: FICO): The Undisputed Winner
Fair Isaac stands to gain significantly from this strategic shift. By directly licensing its scores, FICO captures a larger share of the revenue generated from its proprietary scores, which are used by 90% of top U.S. lenders. This move is projected to generate at least $300 million in incremental revenue for FICO in calendar year 2026, potentially boosting its adjusted EPS growth by 20-25% in fiscal year 2026.

# TransUnion (NYSE: TRU) and Equifax (NYSE: EFX): Facing Significant Headwinds
Historically, TransUnion and Equifax, along with Experian, have served as crucial intermediaries, bundling FICO scores with their own credit reports and adding significant mark-ups. This constituted a substantial and highly profitable revenue stream. The immediate impact on TransUnion and Equifax has been largely negative, with their stock prices plummeting following FICO's announcement. Analysts predict a potential 10% to 15% hit to their average earnings due to the loss of these mark-up revenues.

Broader Industry Implications and Historical Context

FICO's direct mortgage pricing option extends far beyond the immediate financial performance of a few companies; it signifies a broader trend of disintermediation within the financial services sector. This process, where middlemen are removed from transactions, is increasingly prevalent across industries, driven by technological advancements and a demand for greater efficiency and transparency.

What Comes Next: Navigating a Transformed Landscape

The FICO Mortgage Direct License Program heralds a period of significant change for the credit reporting sub-sector, with both short-term and long-term implications that will demand strategic pivots from key players. Short-term impacts include immediate stock market reactions and revenue shifts, while long-term effects will require credit bureaus to innovate and diversify their offerings to remain competitive.

References
FICO's Direct Mortgage Play Threatens Credit Bureaus' Mortgage Dominance^[1] https://markets.financialcontent.com/wral/article/marketminute-2025-10-2-ficos-direct-mortgage-play-threatens-credit-bureaus-mortgage-dominance