In a potentially industry-altering move, FICO has launched a direct license program that will allow tri-merge resellers to calculate and distribute FICO scores directly to lenders.

The program effectively cuts out the middlemen by letting resellers buy FICO scores directly from the company instead of purchasing them from the three major credit bureaus — Equifax, Experian and TransUnion.

FICO, whose legal name is Fair Issac Corp., claimed the direct-to-reseller approach will “drive price transparency and immediate cost savings to mortgage lenders, mortgage brokers and other industry participants.”

But the Consumer Data Industry Association (CDIA) — a trade group whose members include the big three credit reporting agencies — lambasted the move, calling it “a significant price increase disguised as cost-cutting, which will ultimately harm both lenders and consumers.”

Program specifics

A tri-merge reseller is a term for a mortgage credit specialist that provides mortgage companies with a combined FICO score drawing from consumer credit data from all three credit bureaus.

Previously, the reseller would have to purchase the separate FICO scores from Equifax, Experian and TransUnion. The new program lets the reseller bypass that process by purchasing scores directly from FICO, which the reseller then compiles into the tri-merge report that mortgage companies can use to meet the conforming lending requirements of mortgage buyers Fannie Mae and Freddie Mac.

The new FICO direct license program has two options. The first, dubbed the “performance model,” charges a royalty fee of $4.95 per score — the same amount FICO currently charges the credit bureaus per score — plus a funded loan fee of $33 per borrower per score when the loan is closed.

Alternatively, FICO noted in a press release, “lenders may opt to continue using the current per-score-only pricing model, which maintains a $10 per score fee into the tri-merge resellers.” FICO positioned that $10 figure as “the average price previously charged by credit bureaus for the FICO score.”

Lansing’s take

FICO CEO Will Lansing, in a prepared statement, called the announcement “a turning point in how credit scores are delivered and priced across the mortgage industry.”

“Direct licensing of the FICO score brings transparency, competition and cost-efficiency to the mortgage lending process,” he stated. “This change eliminates unnecessary markups on the FICO score and puts pricing model choice in the hands of those who use FICO scores to drive mortgage decisions.”

Lansing elaborated on that stance during a CNBC interview Thursday, saying, “I think there will be a lot of happiness around the idea that score prices are flat to down for next year, and we have competing channels of distribution.”

He also acknowledged the decision had been influenced by prodding from Federal Housing Finance Agency (FHFA) Director Bill Pulte.

“I think the director of the FHFA has been on a mission to increase competition and to find a way to keep costs down for the industry, and that’s really what I think we’ve succeeded in doing,” Lansing said.

Pulte’s position

In May, the FHFA head — whose agency oversees government-sponsored enterprises Fannie Mae and Freddie Mac — posted on social media that he was “not happy with FICO.” He later added “American consumers must be respected” in response to a post from a mortgage broker, who said it is “time to end the FICO monopoly.”

Pulte had previously taken aim at FICO cost increases, writing on X that he was “extremely disappointed” about credit report price hikes. In November 2024, FICO notified credit bureaus that it had increased its wholesale royalty for credit scores related to mortgage originations from $3.50 to $4.95 per score.

In July, Pulte announced that Fannie and Freddie would allow lenders to use VantageScore 4.0, a tri-bureau credit scoring model from VantageScore Solutions, in addition to the mainstay Classic FICO model. He positioned the move as a way to “increase competition to the credit score ecosystem.”

In an apparent olive branch in his sometimes tense dealings with FICO, Pulte gave a shout-out to Lansing in a social media post Thursday.

“I’ve recently had productive conversations with FICO CEO, Will Lansing, and his Representatives,” Pulte wrote. “I GENUINELY appreciate FICO taking Constructive Criticism, which was given in the spirit of ensuring a competitive and safe and sound market, to then generate Creative Solutions to help the American consumer. While their decision is a first step, it is appreciated.”

He added that he encourages the credit bureaus “to also take similar creative and constructive actions to make our markets safer, stronger, and more competitive,” and that VantageScore “should also look at ensuring they are competitive, in every way, including but not limited to costs.”

VantageScore, an independent company jointly owned by the three major credit bureaus, declined to comment for this story.

Pulte also joined CNBC’s “Money Movers” program on Friday, calling the FICO announcement “a big win for the American people.”

“This is just the start, I think, of hopefully more competition in the housing market,” Pulte said, adding that “we also need to see the credit bureaus step up.”

“Get creative,” he implored the credit reporting agencies. “Figure out how to be competitive.”

Credit bureaus respond

Prior to Pulte’s CNBC appearance, Scotsman Guide reached out to Equifax, Experian and TransUnion for comment on the FICO announcement. Experian did not respond, but Equifax and TransUnion were highly critical of the plan.

TransUnion called the funded loan fee a “penalty fee,” saying it would work out to $198 for a couple purchasing a home ($33 for each of the three credit bureau scores, times two). The company said it adds “unnecessary complication in the mortgage process and additional cost burdens on consumers.”

“Resellers and other industry participants would also bear the brunt of these changes which serve only to increase FICO’s revenues,” TransUnion claimed in a statement. “Implementation of any such change is neither certain nor likely to occur near-term.”

Equifax maintained that the alternate per-score-only pricing model essentially doubles costs by raising the per-score price from $4.95 to $10.

“While the announcement has been positioned as a cost savings, it will actually end up costing consumers and the mortgage industry much more — continuing FICO’s established pattern of aggressive pricing actions from their historical sole source position in the mortgage space,” an Equifax statement read.

The CDIA claimed the FICO plan will “inevitably cause lenders to pass on significantly higher costs to consumers, especially those that are successful in securing a mortgage.”

Mortgage groups weigh in

Brendan McKay, chief advocacy officer of the Broker Action Coalition, a grassroots organization that advocates for the interests of mortgage brokers and homebuyers, told Scotsman Guide that while he’s still working through the details of the FICO plan, his initial read is that “this could eventually be positive,” but “it’s just not ready for primetime yet.”

“FICO is framing it as cutting the credit bureaus out, which would lower costs since the bureaus are the biggest driver of inflated report prices,” McKay explained. “But FICO is just a scoring model, and the data still comes from the bureaus. In theory, they could source the data elsewhere more cheaply, but right now reports generated that way aren’t accepted by Fannie, Freddie, or anyone else.”

Mortgage Bankers Association (MBA) President and CEO Bob Broeksmit called the new FICO program “a step in the right direction,” while noting that the MBA has been calling for fixes to what he believes is an “anticompetitive” credit scoring marketplace, with costs steadily increasing for required tri-merge credit reports and other credit reporting products.

“While it remains to be seen if this will result in materially lower costs, MBA will monitor the implementation of this new program while continuing to call for reforms that support a better credit reporting system that promotes more competition, efficiency and lower costs for consumers,” Broeksmit said in a statement.

The Community Home Lenders of America (CHLA), a nonprofit association representing small and midsized independent mortgage banks, said the direct license program “appears to be a good first step in addressing our longstanding criticisms about FICO’s monopolistic pricing and practices.”

But the CHLA also reiterated its previous call for even greater competition than the growing FICO-VantageScore rivalry by having Fannie Mae and Freddie Mac establish their own credit scoring arms.

“CHLA continues to call for study on the viability of Fannie and Freddie setting up their own credit scoring subsidiaries, which, if successful, could be spun into the marketplaces, earning taxpayers even more returns on their investment,” the group wrote in a statement.