Credit Score Clash: FICO Defends Pricing as FHFA Pushes for Model Competition

Tensions between Fair Isaac and federal housing regulators are running high again as FICO’s CEO Will Lansing responded to recent criticism of the company’s prices.

The backdrop: In July, the Federal Housing Finance Agency (FHFA) officially authorized lenders to use either Classic FICO or VantageScore 4.0 for loans delivered to Fannie Mae and Freddie Mac, ending decades of single-score dominance.

Lansing appeared on Bloomberg Television in late July to respond to claims that FICO’s licensing fees were limiting access to homeownership. “We don’t believe price is the issue,” Lansing said. “There isn’t a lender out there refusing to underwrite a loan because of the score’s cost.”

That response came on the heels of earlier criticisms by FHFA, which oversees Fannie Mae and Freddie Mac. The agency has complained for years about FICO’s bundled pricing and its role as the de facto standard in mortgage credit scoring.

The argument reached a heated tone after June testimony by PulteGroup CEO Ryan Marshall, when he referred to FICO’s plight as a “quasi-monopoly.”

FICO Releases Alert on Credit Score Shopping

Lansing warned against allowing lenders to choose from a menu of score models, like VantageScore or another, as that would set off a “race to the bottom.” Then, he said, lenders would choose the one that approves the most individuals, not the one that best predicts payments.

Lansing argued that letting lenders choose the score that yields the most approvals would backfire, leading to more defaults, greater losses, and added costs for consumers. That echoes current fears of the nonprime market: When you relax standards, delinquencies are sure to ensue.

FHFA’s Long-Term Reform Program

Since the mid-2010s, the FHFA has explored credit score competition as part of its broader effort to modernize the housing finance system.

VantageScore — a competing model owned by the three major credit bureaus — has long advocated for its inclusion in the GSE approval process, arguing it would be a significant boost to the model.

The latest version — VantageScore 4.0 — includes trended data but excludes paid collections, which would make it a more desirable measure of financial conduct for consumers with limited credit histories.

FICO contends that a diversified model implementation might blur underwriting or create greater volatility of risks. It feels that different score decisions place a burden on compliance systems and modeling infrastructure — especially when used on highly regulated market segments like mortgages.

Long-Standing Price Issues

Smaller lenders and credit resellers, among others, have decried FICO’s prices as too costly and inflexible. Others contend the existing arrangement stifles innovation and competition, while maintaining FICO’s long-standing market dominance.

Not all lenders agree. Some insist on scoring optionality to break into underserved markets, but others fear disrupting the consistency on which underwriting systems are founded.

Any changes to credit score optionality could force lenders and tech providers to overhaul their automated systems and internal risk models.

Stakes are especially high for nonprime-centric loan providers and fintechs, most of whom rely on streamlined, automated credit assessment. Replacing or adding models may make workflows cumbersome or blur risk filters — potentially increasing exposure to fraud and pricing volatility.

FICO, meanwhile, is defending its dominant position. The company contends that its score has the longest verification history along with regulator confidence. Lansing noted that FICO models are continually stress-tested, unlike many newer alternatives, which lack a comparable history of reliability.