FICO Stock Plunges After White House Approves VantageScore for Government-Backed Mortgages

A major shake-up in the mortgage lending world is sending shockwaves through Wall Street. Shares of Fair Isaac Corporation, better known as FICO, plunged more than 17% Tuesday following a White House-endorsed decision to allow lenders to use VantageScore for government-backed mortgages.

Federal Housing Finance Agency (FHFA) Director Bill Pulte announced that lenders may now use the VantageScore 4.0 model for loans backed by Fannie Mae and Freddie Mac. The change, made effective immediately, is part of what Pulte described as an effort to "increase competition to the Credit Score Ecosystem" and reduce costs for borrowers, in line with President Trump's current policy priorities.

“For decades, FICO has had a monopoly on the credit score market for government-sponsored mortgages,” Pulte wrote in a social media post. “Today’s action will increase access to credit and lower closing costs.”

FICO, long the standard for credit scoring in mortgage lending, has faced criticism in recent years for increasing the cost of credit reports. The Consumer Financial Protection Bureau (CFPB) even launched a public inquiry into what it called “junk fees,” which include surging credit check costs that have reportedly risen as much as 400% since 2022.

VantageScore, created in 2006 by Equifax, Experian, and TransUnion, has been gaining traction among lenders. Unlike FICO, it incorporates rent payments when reported to credit bureaus—an option that could benefit renters looking to become homeowners.

Despite FICO's sharp drop on the stock market, some experts say lenders may still hesitate to adopt VantageScore immediately due to limited experience using it in mortgage underwriting.

“We have trouble seeing lenders abandoning FICO just because they are now able to use Vantage Score,” said Jaret Seiberg, a housing policy analyst with TD Cowen.

Still, Tuesday's decision marks a significant shift in mortgage credit evaluation, potentially reshaping the landscape for millions of future homebuyers.

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