Incremental Returns

Incremental Returns

Why FICO's "Direct License" Move Is More Than a Price Cut—It's a Power Grab

Oct 17, 2025
∙ Paid
4
5
Share

Fair Isaac had a busy week last week.

First, it announced its new FICO Mortgage Direct License Program shooting the stock up over 24% from the day of the announcement until Equifax cut prices on its VantageScore reports, which caused FICO’s stock to drop 10%.

The whipsaw announcements don’t bode well for my slow writing style. But now that things have slowed down, I can put pen to paper and get some thoughts down. Hopefully before another major announcement.

FICO Mortgage Direct License Program

Tri Merge Then

When a lender pulled a tri-merge mortgage credit report, a specialized reseller compiled the data from all three bureaus (Experian, Equifax, TransUnion) and then buys each FICO Score through those bureaus.

FICO charged the bureaus a wholesale fee ($4.95 per score), and the bureaus charged the resellers roughly ~$10 per score, keeping the spread.

Tri Merge Now

FICO will license the mortgage FICO Scores directly to tri-merge resellers, letting them calculate and distribute the scores themselves.

This bypasses the bureaus as middlemen for the score. The underlying credit data still comes from the bureaus but the bureaus lose the ability to pass through the lucrative score mark-up as they did before.

The tri-merge still requires a score based on all three credit bureau reports.

Pricing

FICO offers two pricing options for the direct license. A performance model and a flat model.

For the performance model, the cost is $4.95 per score plus a $33 per-borrower, per-score fee only if the loan funds.

And for the flat model, the cost is $10 per score.

If they choose the performance model, they pay less up front reducing their all-in cost if the loan does not get funded.

Under the performance model, the total score pull cost for two borrowers with a loan that gets funded would be $198.

But if the loan doesn’t get funded the total cost drops to $29.70.

With the flat fee the total score pull cost for two borrowers would be $60.

Resellers can now pick their preferred cost structure.

Fair Isaac Benefits

FICO’s 24% stock move upon the direct licensing announcement, already tells you it will be a huge benefit to the company.

Fair Isaac, already has tremendous pricing power, but the new direct licensing program gives them ever more control. If the customers choose the $10 flat fee, FICO is the one setting and collecting that fee. It is no longer going through the credit bureaus as middlemen. The full $10 is going directly to FICO.

It’s a stealth price increase.

Keep reading with a 7-day free trial

Subscribe to Incremental Returns to keep reading this post and get 7 days of free access to the full post archives.

Already a paid subscriber? Sign in
© 2025 Peyton Hill
Privacy ∙ Terms ∙ Collection notice
Start your SubstackGet the app
Substack is the home for great culture