FICO Stock Tumbles as Equifax Launches Credit Score Price War
Equifax to offer its VantageScore at over 50% below FICO's rates, directly challenging its rival's market dominance after a controversial pricing overhaul.
Shares of Fair Isaac Corporation (FICO) fell sharply in pre-market trading, dropping 3.2% after competitor Equifax announced an aggressive pricing strategy for its own credit scoring model, intensifying the battle for market share in the lucrative mortgage industry.
Equifax, a co-owner of the VantageScore model, revealed it would offer its VantageScore 4.0 to mortgage lenders at a price point more than 50% below FICO's planned 2026 rates. to FICO's recent decision to change its licensing and pricing structure, a move that was met with criticism from credit bureaus and mortgage lenders for significantly increasing costs.
The conflict ignited when FICO introduced a new direct-to-lender licensing program. While FICO claimed the change was designed to increase transparency, industry groups argued it effectively doubled prices and added new operational burdens for lenders. This overhaul created a critical opening for competitors.
Seizing the opportunity, that it intends to challenge FICO's long-standing dominance. The timing is crucial, as the Federal Housing Finance Agency (FHFA) recently approved the use of VantageScore 4.0 for loans sold to government-sponsored enterprises Fannie Mae and Freddie Mac, breaking FICO's historical monopoly in the mortgage market.
For decades, FICO scores were the undisputed standard for U.S. lenders. However, this competitive assault from Equifax threatens to erode FICO's market share and pricing power. "Equifax is expanding its mortgage credit offerings to promote credit scoring competition," the company stated in a press release, highlighting its intent to support consumers and the broader mortgage industry with more affordable options. could significantly accelerate the adoption of VantageScore.
Investors are now weighing the implications of a full-blown price war. While FICO has enjoyed premium pricing for years, the landscape is now fundamentally altered. The elevated trading volume in FICO shares indicates that the market is taking this threat seriously, forcing the company to defend its turf against a rival determined to capitalize on industry-wide frustration over rising costs.