FICO Launches Cost-Cutting Direct License Program for Mortgage Lending

In a move poised to upend long-standing industry norms, analytics and credit-scoring leader FICO (NYSE: FICO) has announced a bold new distribution model: the FICO® Mortgage Direct License Program. Under this plan, tri-merge resellers — which aggregate credit data from the three major U.S. credit bureaus (Equifax, Experian, TransUnion) — may now compute and distribute FICO Scores directly to mortgage lenders and brokers, bypassing the bureaus as middlemen. The result: greater pricing transparency, lower per-score costs, and a rebalancing of power in mortgage credit scoring.

FICO Launches Cost-Cutting Direct License Program for Mortgage Lending

Why FICO is doing this

For decades, mortgage originators have obtained FICO Scores through intermediaries — the credit bureaus — which charged mark-ups layered atop FICO’s wholesale royalty. FICO’s new program aims to eliminate those mark-ups and bring pricing power closer to lenders and resellers. According to FICO, the new structure may reduce per-score costs by as much as 50 %.

FICO CEO Will Lansing characterized the change as “a turning point in how credit scores are delivered and priced across the mortgage industry,” saying it “eliminates unnecessary mark-ups” and “puts pricing model choice in the hands of those who use FICO Scores” in mortgage origination.

Part of the impetus may lie in growing regulatory and competitive pressures. In recent years, the Federal Housing Finance Agency (FHFA) has publicly criticized FICO’s price increases and signaled interest in expanding alternatives like VantageScore into the mortgage domain. FHFA Director Bill Pulte welcomed the new program as a “first step” toward greater competition.

How the pricing models work

FICO is offering two distinct pricing options under the new program: a performance model and a per-score only model.

• Performance model: Under this plan, FICO charges a royalty of $4.95 per score (roughly half of what many resellers currently pay after mark-ups) plus a $33 “funded loan fee” per borrower per score when the mortgage is closed. The funded loan fee is effectively a downstream charge, reflecting the value the FICO Score contributes across insurers, investors, rating agencies, GSEs, and other market participants.

  
  

• Per-score only model: This option retains a flat $10 per score fee, equivalent to the average price many resellers have paid under the old bureau-driven structure. FICO describes this option as maintaining “no increase” in per-score cost for lenders who prefer a simpler, all-in approach.

  
  

FICO also plans to offer both options to the major credit bureaus themselves on the same terms — though it does not control additional mark-ups those bureaus may apply.

Importantly, FICO still relies on credit bureau data: resellers must continue to contract with bureaus to acquire the raw data for tri-merge processing. The direct license only changes how the FICO Score itself is priced and delivered.

Benefits, challenges, and skepticism

Potential benefits

1. Lower costs and transparencyBy eliminating bureau mark-ups, the new program stands to reduce the cost of FICO Scores for lenders and resellers. FICO claims savings of up to 50 % per score.

2. Greater pricing control and optionalityResellers and lenders can choose which model fits their volumes and margins. In effect, FICO shifts some of the margin levers to the end users.

3. Strategic repositioning amid regulatory pressureThe move may buffer FICO from closer regulatory scrutiny by addressing criticisms around monopolistic pricing practices.

Risks, uncertainties, and industry pushback

1. Credit bureau resistanceThe credit bureaus have criticized FICO’s plan, arguing it introduces “penalty fees,” complicates processes, and may ultimately impose higher costs on consumers. TransUnion, for example, contended that the funded loan fee — $33 per score for each lender closing — amounts to a hidden surcharge. Equifax similarly asserted that the alternate pricing could effectively double per-score costs.

   
   

2. Complexity and adoption frictionAdapting existing workflows, integrating FICO’s licensing and software changes, and persuading resellers to shift will likely take time. Some mortgage groups argue the program is not yet “primetime.”

   
   

3. Data control remains with bureausCritics point out that FICO does not control the underlying credit data; the credit bureaus remain essential gatekeepers. Some analysts see this as a structural constraint on how much disruption the new model can deliver.

   
   

4. Regulatory and consumer impactsObservers caution that savings may not fully reach consumers; lenders might absorb or adjust pricing over time. Others worry complexity could hamper transparency for borrowers.

Market reactions and competitive implications

The announcement triggered sharp market responses. FICO’s shares jumped strongly, while Equifax, TransUnion, and Experian slid amid fears of revenue erosion.

Analysts estimate bureau earnings could be hit by 10 %–15 %.

Some industry voices hail the move as overdue. The Mortgage Bankers Association called it “a step in the right direction” toward more competitive credit scoring. 

Meanwhile, mortgage trade groups expressed cautious optimism, noting it remains to be seen how widespread adoption will be.

Beyond FICO, this shift could stimulate competitive pressure on alternative scoring systems such as VantageScore, especially within government-backed mortgage programs.

Outlook: disruption, but gradual

FICO’s direct license program is unquestionably one of the boldest changes to address entrenched margins in credit scoring for mortgages. Whether it achieves its full disruptive potential will depend on the willingness of resellers, lenders, and bureaus to adapt. It also depends on the regulatory environment and oversight, especially in balancing cost reductions with fairness and consumer protection.

In the near term, we may see selective adoption — players willing to gamble on workflow change and margin opportunities. Over the medium term, if enough resellers convert, the mortgage scoring landscape could tilt more decisively toward user-driven pricing rather than intermediation mark-ups. That said, given the inertia and complexity in mortgage workflows, the transition is unlikely to be swift.

For now, FICO has opened a new front in the credit scoring wars — and the broader mortgage industry is watching closely.