FICO has notified the credit bureaus that it is raising its wholesale royalty from $3.50 to $4.95 per score for mortgage originations, according to a post on the company’s website.

The change had been rumored for weeks, prompting lawmakers and mortgage industry stakeholders alike to press the federal government to take action. The new price, which will kick in next year, is the fourth change in mortgage industry royalty costs enacted by FICO (officially the Fair Isaac Corporation) in its 30-year history. However, the hike marks the third straight year of price increases for FICO scores, with the company instituting a tier-based system in 2023 and adopting the $3.50 price this year.

With the price increase official, Jim Wehmann, executive vice president of scores at FICO took to the internet to explain the company’s thinking.

“At this new per-score royalty, the amount collected by FICO will remain a small percentage of the cost of the tri-merge credit report and score bundle (on average approximately 15% of the $80 to well over $100 tri-merge bundle cost), which is itself an exceedingly small share of overall mortgage closing costs,” Wehmann said.

“Contextually… with total average closing costs of $6,000, FICO’s share of total average closing costs before this new per-score royalty was only approximately two-tenths of 1%. Even after this change, FICO’s share will remain only approximately two-tenths of 1%. Both before and after our new per-score royalty, the royalties collected by FICO are fair and reasonable, and continue to be the lowest of all individual mortgage closing costs.”

Wehmann went on to claim that the FICO score is “one of the most critical and cost-effective tools used in residential mortgage finance today” when weighing its cost against the value it provides.

“Despite being the lowest of all individual mortgage closing costs, some have tried to suggest that our FICO Score royalty is a barrier to homeownership,” Wehmann said. “It is not. For just a few dollars per score collected by FICO, the price commonly paid by a consumer for a cup of coffee, credit ready consumers can unlock access to homes worth hundreds of thousands of dollars — a small cost for life-changing benefits to aspiring homeowners.”

Wehmann also explained that FICO doesn’t usually sell credit scores directly to lenders. Rather, per Wehman, distribution of the FICO score to lenders is controlled by the three major credit bureaus — Equifax, Experian and TransUnion — which bundle the FICO score with its tri-merge report used by lenders.

“The credit bureaus and their tri-merge resellers not only set the price of the VantageScore used in connection with mortgage transactions, but they — not FICO — set the end user price for the FICO … FICO has no control over the amounts the credit bureaus or their resellers charge lenders for the credit report and score bundle, or for any markup they add to the FICO Score price,” Wehmann said.