Does This Credit-Scoring Stock Have a Monopoly?
FICO’s new pricing model is reinforcing its market dominance despite regulatory scrutiny and challenges from rivals.
Key Takeaways
Fair Isaac Corp controls over 90% of the US credit-scoring market and recently introduced a direct pricing model that bypasses traditional credit agencies.
The new model boosted FICO’s stock by roughly 20%, while competitors like Equifax, Experian and TransUnion fell amid fears of losing relevance.
Despite regulatory criticism and potential competition from VantageScore, FICO’s dominance and rising earnings make it a steady, defensible growth stock.
Fair Isaac Corp (FICO) [FICO] is an American data analytics company operating in the credit ratings industry. FICO scores help to determine a borrower’s credit profile and risk.
The credit-scoring system is used by the credit reporting agencies Equifax [EFX], Experian [EXPGF] and TransUnion [TRU]. As a result, FICO controls the credit reporting market, with a market share of more than 90%, as of the end of Q3. There are alternatives, though, such as VantageScore, a joint venture between the three aforementioned agencies.
This piece will look at how FICO is aiming to shake up the lending market by bypassing the agencies altogether. It will also highlight what could be in store for FICO stock when the company reports its Q4 2025 earnings after the bell on November 5.
FICO New Pricing Model Rips Up Mortgage Lending Process
FICO unveiled a new pricing model in early October that will allow credit scores to be licensed directly to mortgage resellers, who then distribute the scores directly to borrowers.[1]
According to FICO CEO Will Lansing, the move will deliver cost-cutting efficiencies across the mortgage-lending process.
“This change eliminates unnecessary markups on the FICO score and puts pricing model choice in the hands of those who use FICO scores to drive mortgage decisions,” said Lansing in the press release.
Equifax hit back within a week by offering scores through VantageScore 4.0 at a reduced price, and even for free for some eligible customers.[2]
FICO Stock Soars on Shake-Up
The news sent the FICO stock up approximately 20%. The shares of Equifax, Experian and TransUnion all fell in response, as investors weighed how FICO’s move might impact the importance of the three agencies in the future of credit reporting in the US.
FICO stock is up 10.89% in the past month through October 31, but is down 16.65% since January 1.
FICO Sees Steady Growth in Q3 2025
Demand for FICO’s credit-scoring system helped to drive Q3 2025 revenue up 20% year-over-year and 8% sequentially to $536.4m — scores revenue was up 34% and 9%, respectively, to $324.3m.[3] As the graph below shows, scores revenue has steadily grown its share of overall revenue, while its other segments have remained largely flat.
GAAP net income for Q3 2025 came in at $181.8m, or $7.40 per share, compared with $126.3m, or $5.05 per share, reported a year earlier.
The strong quarter to the end of June led FICO to raise its full-year earnings outlook.[4] GAAP net income is expected to be $630m, or $25.60 per share, up from previous guidance of $624m, or 25.05 per share. Revenue guidance remained unchanged at $1.98bn.
Much of the Q3 earnings call was spent discussing the Federal Housing Finance Agency’s (FHFA) announcement in July that government-backed Fannie Mae and Fannie Mac are now allowing lenders to use VantageScore to determine borrowers’ credit worthiness, instead of FICO.[5] Bill Pulte, who was appointed Head of the FHFA in March, took to X to accuse FICO of having a “monopoly” that “has ripped off Americans for decades” through price increases.[6]
Speaking to CNBC’s Jim Cramer following the release of the Q3 results, FICO CEO Lansing dismissed Pulte’s criticism. FICO’s latest credit score model, 10T, released in June, outperforms both FICO’s classic model and VantageScore, said Lansing.[7]
FICO’s Q4 2025 results are due to be reported after market close on November 5.
As mentioned earlier, FICO does not have direct competitors as such, so it is hard to compare its earnings with those of the agencies. Nonetheless, here is how FICO stock’s fundamentals line up against with EFX stock and TRU stock.
All three companies are forecast to report steady revenue growth over the next couple of years. This should not come as a surprise, as people are always applying for loans and mortgages.
FICO stock could be considered overvalued based on its higher forward P/E and forward P/S ratios. That said, it could also be considered undervalued based on how much FICO stock has fallen this year and the fact the company has a strong competitive advantage.
FICO Stock: The Investment Case
The Bull Case for FICO Stock
Despite the criticism FICO has faced from the head of the FHFA, the company’s market dominance means it still has a fair level of pricing power.
Lansing told Cramer back in July that the company has been competing with VantageScore for 15 years and “we always win”, adding that “FICO is the clear industry standard”.
The Bear Case for FICO Stock
VantageScore is probably going to be no threat to FICO’s market dominance, at least in the near and medium terms. However, VantageScore could be used for more mortgage applications in the quarters and years ahead.
Following the decision that Fannie Mae and Freddie Mac will be able to allow lenders to accept VantageScore, the FICO alternative could be used to help more people access mortgages. Unlike FICO, VantageScore takes into account rent and utility payments when calculating a borrower’s potential credit risk.
Conclusion
FICO’s business is not particularly thrilling, but there should always be demand for its credit-scoring model. Given the company’s dominant role in the credit-scoring industry, FICO stock is one for investors looking for steady growth.
This is for informational purposes only. OPTO Markets does not recommend any specific securities or investment strategies. Investing involves risk and investments may lose value, including the loss of principal. Past performance does not guarantee future results.
[1] https://investors.fico.com/news-releases/news-release-details/fico-launches-cost-cutting-direct-license-program-mortgage
[2] https://investor.equifax.com/news-events/press-releases/detail/1370/equifax-expands-mortgage-credit-offerings-to-promote-credit
[3] https://fico.gcs-web.com/static-files/17df5a1c-38ba-457f-bdd8-55cbf7d3d6f4
[4] https://investors.fico.com/news-releases/news-release-details/fico-announces-earnings-740-share-third-quarter-fiscal-2025
[5] https://singlefamily.fanniemae.com/originating-underwriting/credit-score-models
[6] https://x.com/pulte/status/1945885972375150768
[7] https://www.cnbc.com/2025/07/31/fico-ceo-defends-credit-score-pricing-amid-fhfa-criticism.html