Why Fair Isaac Corporation Fell This Week
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S of Fair Isaac (FICO -0. 43%) fell this week, down 13. 4% as of 12:10 p. ET on Thursday, according to data from S&P Global Market Intelligence. FICO has had...
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July 10, 2025
02:49 PM
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S of Fair Isaac (FICO -0. 43%) fell this week, down 13. 4% as of 12:10 p
ET on Thursday, according to data from S&P Global Market Intelligence
FICO has had somewhat of a monopoly on credit scoring, which has recently paved the way for large price increases, the most recent of which occurred in January
But this week, current Federal Housing Finance Agency (FHFA) Director Bill Pulte continued his mini-war against the company in the name of lowering costs for owners
Can VantageScore eat into FICO's market
This week, Pulte posted on X, formerly known as Twitter, that the current government-sponsored entities (GSEs) that buy mortgages, Fannie Mae (FNMA 1. 34%) and Freddie Mac (FMCC 0. 27%), will allow lenders to use something called VantageScore 4. 0, a new potential FICO competitor, without having to build new infrastructure
VantageScore is a new credit score developed by the three major credit bureaus in 2017
It incorporates alternative data and some less stringent traditional data requirements to better score people, say, in rural areas or with less credit history
Fair Isaac stock fell hard in the wake of Pulte's tweets, as the two big GSEs guarantee half of all mortgages in the United States
Therefore, if a significant portion of mortgages were now scored using an alternative, FICO could potentially lose market relative to its current near-100%
Image source: Getty Images
But the threat may not be as dire as all that Even after this week's decline, Fair Isaac still trades at a whopping 70 times earnings, which means investors aren't exactly expecting huge declines in market or revenue
This may be for a couple of reasons
First, VantageScore appears to be an option for a smaller subset of borrowers with limited credit history
It's also un how much lenders will want to use it, except in cases where the current FICO score excludes a borrower
Second, the FHFA had already mandated Fannie Mae and Freddie Mac to use VantageScore back in late 2022, while giving the buying market a three-year grace period to implement it
So, this week's news isn't really new information, although Pulte appears to have sped up the acceptance cess while also making VantageScore easier to use on existing nology
Moreover, perhaps the allowance of VantageScore will hold off the threat of federal agencies turning to "bi-merge" scoring -- allowing mortgages to be scored by only two credit bureaus
Currently, the standard for GSEs is a "tri-merge" system for both FICO and VantageScore, which requires all three credit bureaus to run a score
There had been talk of allowing bi-merge to lower costs in recent years, which would also reduce the volume of FICO scores
So, perhaps this new competition will ward off that threat
Still, it does appear that the large price hikes FICO has implemented over the past few years, and most recently in January, will cease for now
Even though FICO scores cost only $4. 95 today, the new FHFA director has previously called FICO's price hikes and seems keen to show how the administration is lowering costs
Billy Duberstein and/or his clients have no position in any of the stocks mentioned
The Motley Fool recommends Fair Isaac
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