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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.”
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Samuel O’Brient is an experienced financial markets and business journalist who has written extensively on a wide range of topics involving economics, technology and public policy. At Business Insider, he covers important macro and micro economic stories, including takes from leading economists and hedge fund managers, breaking IPOs, corporate bankruptcies, meme stocks and short-selling. He also writes on other markets such as crypto, oil and real estate.He has interviewed many of the market’s most influential voices, ranging from top economists such as Mark Zandi and Richard Thaler to prominent investors including Danny Moses, Andrew Left, Anthony Scaramucci,Louis Navellier and Grant Cardone.Programs such as LiveNOW from Fox , Taking Stock and Ticker News have had Samuel on to discuss stock market and economic developments. His reporting has been cited by The New York Times DealBook, Bloomberg Radio, Forbes, Entrepreneur, Gizmodo and TheFutureParty.Samuel began at InvestorPlace, covering investing, retail trading and macro economic trends. Prior to joining Business Insider, he served as a technology markets reporter at TheStreet. He is a graduate of Sarah Lawrence College and Trinity College Dublin.Samuel’s work has appeared in publications such as TipRanks, EV and Observer. When he isn’t chasing down stories, he can often be found browsing book and record shops. To reach Samuel, email him at sobrient@insider.com or connect with him on LinkedIn. He is also on Signal as Samuel Clemens.