Fico Stock Plummets As Credit Reporting For Mortgages Gets Shaken Up

• Fair Isaac stock plunged on Tuesday.
• FHFA director Bill Pulte said Fannie and Freddie will now also incorporate VantageScore into mortgage pricing.
• Rocket Mortgage, meanwhile, announced it will also use VantageScore for underwriting mortgages.

The move: Fair Isaac Corporation stock plunged as much as 29% on Tuesday to a low of $595.19, extending declines over the past month. Shares of the financial data and credit reporting company are down 64% year to date.

Why: FICO stock dropped after Bill Pulte, the director of the Federal Housing Finance Agency, said that Fannie Mae and Freddie Mac would incorporate a new metric to assess mortgage borrowers' creditworthiness, adding VantageScore into the mix. The move breaks FICO's three-decade long grip on mortgage underwriting. VantageScore is a model that pulls in data from three other credit reporting agencies, Experian, TransUnions, and Equifax.

"We are Simplifying Mortgage Pricing following feedback from lenders and consumers," Pulte wrote on X. "Instead of two separate pricing grids, which makes zero sense, Fannie and Freddie are hereby moving to ONE PRICING GRID with VantageScore joining the existing FICO Classic pricing grid."

This wasn't the only bad news weighing on FICO stock, though. On Monday, Rocket Mortgage announced that it will be using VantageScore 4.0 as its preferred model for all eligible loans, a move which Pulte posted in support of.

What it means: The move is a blow to FICO, which has been the exclusive credit-reporting agency for government-backed mortgages since the mid-1990s.

For borrowers, it could be a positive development, pulling in credit history from a wider range of sources to potentially get more favorable pricing at a time when mortgage rates are surging past 7% nationwide.

There's little silver lining for FICO, however, and Rocket's decision could compel other lenders to start prioritizing VantageScore as well.

Deutsche Bank maintains a buy rating on FICOstock, but it didn't downplay the difficulties that the company may be facing.

"We would have expected continuing gaming and for lenders to optimize pricing with this change," the bank wrote in a note to investors. "However, the announcement from Rocket this evening following this change is meaningfully negative and consequential for FICO."