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Wall Street investors and analysts forecast that mortgage credit-score costs will rise in 2025 as lower interest rates may drive an increase in home loan applications.
Fair Isaac Corp. (FICO), the company that retains the rights to the market’s widely adopted consumer credit-risk assessment methodology, is expected to raise the price for mortgage credit scores from $3.50 to at least $5, according to the estimates.
This hike would mean that FICO could collect $15 for a tri-merge report and score bundle, which cost about $50 last year. The retail price difference stems from additional fees imposed by credit data distributors like TransUnion, Experian and Equifax.
FICO told HousingWire that it did not wish to comment.
In early October, Wells Fargo analysts wrote in a report that they “see a long runway for FICO to continue increasing its prices in mortgage and other verticals.” The report cited FICO’s dominant market position, which covers more than 95% of securitizations, and the fact that its scores make up less than 0.2% of a typical $6,000 mortgage closing cost.
If FICO raises mortgage score prices to $5, alongside increases for auto loan and credit card scores, 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),” according to the analysts. “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.” Analysts estimate the firm’s revenue is poised to grow at 13% at a compound annual rate over the next five years.
If the anticipated price hike occurs in 2025, it would mark the third straight year of increases. FICO scores first entered the market in 1989 and became a standard tool for major credit reporting agencies two years later. In 2012, the parties began to renegotiate their license agreements since FICO royalties had been flat for three decades.
The royalties increased to $0.50 to 0.60 per FICO score in 2018. 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.
The moves come as Fannie Mae and Freddie Mac are moving away from the current Classic FICO credit score model. They will require lenders to use two credit scores generated by the FICO Score 10 T and the VantageScore 4.0 models, which are considered more inclusive than their predecessors.
Analysts also pointed to potential increased regulation in the credit score market, mainly from the Consumer Financial Protection Bureau. Director Rohit Chopra said this year that lenders and consumers alike are being overcharged by the credit reporting industry.
