For decades, if you wanted a mortgage in America, your creditworthiness was judged by one name: FICO. That's now officially changing.
Bill Pulte, the Director of the Federal Housing Finance Agency (FHFA), has told Fannie Mae and Freddie Mac to let all lenders use the VantageScore credit scoring system. The directive, announced Thursday on X, effectively shatters the long-standing monopoly that Fair Isaac Corp. (NYSE: FICO) has held over the mortgage credit scoring business.
Pulte didn't mince words. "Effective immediately, I'm instructing Fannie and Freddie to approve all lenders to use VantageScore," he wrote. The initial rollout of VantageScore by the two government-sponsored enterprises has been "incredibly successful," he noted, with 50 lenders already delivering loans using the alternative scoring model.
But Pulte's frustration with FICO goes beyond just wanting competition. He accused the company of jacking up prices in a way that would make any consumer's blood boil. "Since 2020, FICO has increased the price per a person's credit score by 1,800%," he said. "FICO has enjoyed a monopoly. No more."
The market took the news seriously. In Friday's pre-market trading session, FICO stock declined 2.14%. The company's business model, which relies heavily on lenders paying to access its scores for every mortgage application, just got a whole lot less certain.
But Pulte isn't stopping with FICO. In a separate post, he turned his attention to the three credit reporting agencies that own VantageScore: Equifax Inc. (NYSE: EFX), Experian (OTC: EXPGF), and TransUnion (NYSE: TRU). He accused them of operating like cartels and overcharging Americans for far too long.
"Equifax, Experian, and TransUnion have been overcharging Americans for far too long. This will end soon," Pulte warned. "We are seriously considering bi-merge and stronger solutions (SAFER and SOUNDER). We will not allow companies to take advantage of American consumers. No more."
The reference to "bi-merge" suggests the FHFA is exploring whether lenders should only need to pull credit data from two of the three bureaus, rather than all three, which could significantly cut costs for consumers and lenders alike.
