Fair Isaac (FICO) shares jumped 10.7% premarket on Thursday after the company said it would begin licensing its credit scores directly to mortgage resellers, bypassing intermediaries like Experian, Equifax and TransUnion. The move is expected to increase pricing transparency and reduce costs for lenders and brokers. Meanwhile, shares of the major credit bureaus plunged—Experian down 8%, Equifax 12%, and TransUnion 11%—on concerns the shift will erode their margins.

Under the new distribution model, FICO will offer lenders direct access to its scores, eliminating the roughly 100% markup traditionally charged by credit bureaus. Lenders may still obtain scores via the bureaus if they prefer, but the option for direct licensing is intended to foster competition. Analysts warn the change could cut bureau earnings by 10–15%.

The announcement followed regulatory developments, including the Federal Housing Finance Agency’s move to permit use of VantageScore alongside FICO scores in government-backed mortgages. That decision had already weakened FICO’s pricing leverage. Ever since, many lenders and analysts have anticipated pressure on the traditional scoring model.

FICO CEO Will Lansing said the shift would “eliminate unnecessary mark-ups on the FICO Score and put pricing model choice in the hands of those who use FICO scores to drive mortgage decisions.” He emphasized the change is a watershed moment in how credit scores are distributed across the mortgage industry.

The move marks a significant disruption in the credit reporting ecosystem. If lenders widely adopt the direct licensing model, it could fundamentally alter the relationships and revenue models built around the credit bureaus. The bureaus may be forced to adapt quickly or risk long-term revenue erosion.

Source: Reuters.