The news: FICO introduced a new model for pricing and licensing its score for tri-merge resellers—vendors that consolidate credit reports and provide reporting to mortgage lenders, per The Wall Street Journal.

In this program, FICO licenses its scores directly to these vendors while also cutting out the credit bureaus, Equifax, Experian, and TransUnion, as intermediaries.

The details: FICO’s new modeI allows these resellers to calculate and distribute FICO scores on their own.

• By cutting out the bureaus, it eliminates their fees for retrieving scores.
• FICO also changed its fee structure for these vendors to $4.95 per score (the historical “score-only” pricing is $10 per score) and a $33 fee per borrower after mortgage closing.

The backdrop: FICO’s move could be positive for lenders—they’re allowed to pass along the closing costs to borrowers. However, reactions from the mortgage industry were mixed, per Housing Wire. It’s unquestionably bad for the bureaus.

The announcement immediately surfaced tensions between FICO and the credit bureaus.

• TransUnion fired back with a terse statement about FICO’s pricing, which may cause direct fees for a funded loan to rise by $99 per homebuyer.
• The Consumer Data Industry Association cast doubt on the idea that FICO’s pricing model would reduce costs, per Housing Wire.

FICO has a good reason to hit back. The Credit Score Competition Act, which was signed into law in 2018, directed the Federal Housing Finance Agency (FHFA) to consider new scoring models for government-backed mortgages. The FHFA is moving ahead with a plan that will allow Fannie Mae and Freddie Mac to adopt VantageScore 4.0, which was developed by the bureaus, as an alternative to the FICO score.

Where we go from here: This is another shot in the protracted war between FICO and the credit bureaus. VantageScore is a credible threat to FICO’s dominance, but the bureaus will lose the markup on the FICO scores that they were distributing. In addition, margins will get squeezed as they lose the markup from resales.

But credit report data needs to come from somewhere. Resellers will still need to buy it from the bureaus, even if they buy FICO scores directly. And outside of mortgage, FICO and the bureaus keep growing their reach into different forms of consumer data. FICO, for example, will incorporate buy now, pay later (BNPL) into two of its scoring models.