The mortgage industry braces for (more) FICO price hikes

In the halls of the Colorado Convention Center on Monday, it was hard not to overhear mortgage bankers gnashing their teeth over the rumored price hikes for Fair Isaac Corp (FICO) scores.

“They’ve got us by the balls,” said one mortgage pro in an interview between sales meetings at Mortgage Bankers Association (MBA) Annual 2024 in Denver. “It’s an abuse of power, a complete monopoly.”

“It’s outrageous,” huffed another in an interview as he walked beneath a banner that touted FICO as the presenting sponsor of the event. “What choice do we have but to pay more? And you just know the [credit reporting] bureaus are going to pad their fees using this as cover, too.”

FICO, the company that retains the rights to the market’s adopted methodology to measure consumer credit risk and licenses the scores to the credit reporting bureaus, currently charges $3.50 per score to all mortgage lenders, independent of their volume. A tier-based structure of $0.60 to $2.75 per score was implemented in 2023, which resulted in prices for some lenders increasing by up to 400%. After complaints from lenders, FICO returned to a fixed royalty of $3.50 per FICO score in 2024. But it collected the same per-score price for soft pulls and hard pulls. Wall Street expects new cost increases in 2025 and 2026.

A tri-merge report that a couple years ago was $20 is around $60 right now, one industry pro told HousingWire. Though mortgage lenders don’t want to charge borrowers upfront, many have had to because the pull-through rate on loans makes it economically infeasible otherwise, especially for refis. “We have to eat that otherwise and it’s discouraging [for borrowers],” she said. Rising credit reporting costs mean that some lenders pay hundreds of thousands, or millions of dollars, more than they used to, depending on the volume of mortgage applications they’re processing.

What the mortgage industry’s been told

Despite widespread speculation and hints during company earnings calls, FICO has neither confirmed nor denied that cost increases on credit reporting will affect mortgage lenders in 2025.

“We have not provided the pricing details to our channel partners,” a FICO spokesperson told HousingWire when asked about the rumored hikes for 2025. “Until that is finalized, we have no comment.”

HousingWire asked over a dozen lending executives if they’ve received any communications from FICO regarding potential price increases; none said they had.

Several mortgage executives, however, told HousingWire that reps at credit reporting agencies and resellers will receive information on the FICO price increases after the election, likely later in November or in early December.

The credit reporting bureaus Experian, Equifax and TransUnion either declined to comment or did not return a request for comment. But industry sources said they fully expect the credit reporting agencies to increase their prices as well.

What will it cost?

If FICO raises mortgage score prices to $5, as is rumored, Wells Fargo analysts estimate the company could see a $200 million boost in revenue in fiscal year 2025. This represents an 11% gain for its expected $1 billion business-to-business channel. 

“We’re raising the fiscal year 2025 and 2026 estimated revenue growth to 22% and 18% (from 17% and 16%), baking in an increase in FICO’s mortgage score price to $5 in 2025 and $6.50 in 2026, alongside additional pricing actions in auto and card,” the analysts wrote in the report. 

Meanwhile, Jefferies analysts also wrote earlier this month that some buy-side investors expect the cost of the mortgage credit scores to be raised to $5.25, adding $180 million in total next year. But this seems too elevated, they added. 

“Most are anticipating price increases closer to last year (an estimated $110 million – $130 million),” the analysts wrote. “We have chosen to be conservative and are modeling $100 million. This reflects our view that the company is poised to benefit from volume improvement and does not need to be as aggressive as it has in the past.” 

UBS analysts also said that pricing has been contributing to an important part of FICO’s growth, a trend that should “continue given its moated business model of low churn and scale coupled with its low percent of total mortgage cost.”

Indeed, FICO argued in March that its royalties constitute just 15% of a tri-merge credit report and 2/10ths of 1% of mortgage closing costs. The real costs, the company said, are coming from the credit reporting bureaus they license their scores to.