Fair Isaac Corp. (FICO) will once again raise the cost of credit scores, several investment firm reports predict.
Recent notes from Jeffries and Wells Fargo forecast that credit scores could see close to a 50% hike in 2025. The current cost of a mortgage credit score is $3.25 but could reach the $5 range, which would increase the cost of tri-merge reports issued by the three credit bureaus.
Will Lansing, CEO of FICO, in the company’s third quarter earnings call, foreshadowed that prices may rise in the foreseeable future.
“What we charge for the FICO score is so much less than the value that we provide…,” Lansing said. “Our thought process is that over time, we’re going to close some of that gap”
FICO declined to comment Friday.
Last year, FICO announced a significant 400% price hike for all lenders, which sparked backlash from the mortgage industry. Trade groups and industry professionals are now expressing similar concerns regarding how potential hikes in price will impact consumers.
Jeffries, an investment banking and capital markets firm, wrote that investors believe the cost of mortgage credit scores will be raised to $5.25 in 2025. This would equate to additional revenue for the company of over $180 million.
But the investment firm was cautious with predictions, noting FICO “is poised to benefit from volume improvement as well and does not need to be as aggressive as it has in the past.”
A report by Wells Fargo, published in early October, said it sees “a long runway for FICO to continue increasing its prices in mortgage and other verticals.”
Mortgage trade groups, industry stakeholders and members of Congress expressed worry over how this will impact housing and consumers.
Bob Broeksmit, CEO of the Mortgage Bankers Association, pointed out that over the past two years the trade group has “voiced frustration with the lack of transparency behind the ongoing price hikes for tri-merge credit reports and other credit reporting products.”
“While FICO and the credit reporting agencies are private companies free to set their prices as they wish, raising prices once again would hurt consumers at a time of continued affordability challenges,” he wrote in a statement Friday. “Lenders are required to obtain FICO scores and three credit reports to make most loans to prospective homebuyers and homeowners looking to refinance.”
“Charging more every year for a long-established product underlines the lack of competition in this space,” Broeksmit added.
The CHLA dubbed FICO raising costs “a runaway train.”
“We’re astounded, but unfortunately, not surprised that Fair Isaac Corp. is continuing to use its raw monopoly power to extract more money from the pockets of first-time homebuyers. That’s an oversimplification, but that’s what’s going on,” said Rob Zimmer, director of external affairs at CHLA, Friday.
The topic is also getting attention from members of Congress. Earlier this week, a group of 34 Senate and House members called on the Department of Justice and the Consumer Financial Protection Bureau to investigate FICO’s alleged anti-competitive behavior.
“The DOJ should investigate whether FICO and others are engaging in behavior that violates federal antitrust law,” members of Congress wrote to the Biden Administration. “And the CFPB should explore potential remedies to exploding credit reporting costs, including a cap on fees that credit reporting agencies can charge and interoperability requirements that would allow consumers to move their credit scores without new fees.”
