Fannie Mae, Freddie Mac and the Federal Housing Administration announced that they will accept VantageScore 4.0 and FICO 10T for mortgage underwriting, ending the exclusive use of FICO Scores for government‑backed mortgages.
FICO’s financials underscore the significance of the change. In fiscal 2025 the company reported total revenue of $1.99 billion, a 16% year‑over‑year increase, with the Scores segment contributing $1.169 billion—27% higher than the prior year. The Scores segment accounted for roughly 60% of quarterly revenue in Q4 2025, while the Software segment generated $204.2 million. The company’s high margins in Scores, driven by per‑score pricing and bureau mark‑ups, have been a key source of profitability.
The new scoring options threaten to erode FICO’s pricing power in the largest mortgage market. To counter this, FICO has accelerated its Direct Licensing Program, launched in October 2025, which allows resellers to calculate and distribute FICO Scores directly, bypassing credit bureau mark‑ups. The company is also migrating to a cloud‑based FICO Platform, shifting revenue toward enterprise software fees that are less vulnerable to regulatory changes.
Will Lansing, FICO’s CEO, said the Direct Licensing Program “brings transparency, competition, and cost‑efficiency to the mortgage lending process” and eliminates unnecessary mark‑ups. HUD Secretary Scott Turner highlighted the move as a step toward expanding access to homeownership for creditworthy borrowers who may have been overlooked under older systems. FHFA Director William J. Pulte noted that the agencies are “modernizing credit scoring with more predictive models, helping millions of Americans who responsibly pay rent qualify for mortgages.”
VantageScore 4.0’s broader coverage—scoring an additional 33 million U.S. adults, including those with limited credit history—offers lenders a more inclusive tool. Its use of trended data and alternative data such as rent payments improves default prediction, potentially lowering costs for both lenders and borrowers. The acceptance of FICO 10T, which also incorporates trended data and rental history, signals a broader shift toward modernized scoring models.
The regulatory shift is viewed as a competitive challenge to FICO’s core business. While the company’s Direct Licensing Program and platform migration are designed to mitigate revenue loss, the move underscores the need for FICO to diversify its product mix and strengthen its software offerings to maintain profitability in a more competitive environment.
The content on EveryTicker is for informational purposes only and should not be construed as financial or investment advice. We are not financial advisors. Consult with a qualified professional before making any investment decisions. Any actions you take based on information from this site are solely at your own risk.