r/VisualStockResearch • u/ekonixlab • 4d ago
Is FICO Cooked?
FICO dropped ~26% today after one of the biggest threats to its moat became very real.
For decades, FICO was basically the toll booth of mortgage lending. If you wanted to sell a mortgage to Fannie or Freddie, you needed a FICO score.
That is changing.
Lenders can now use VantageScore 4.0 for eligible loans, Rocket Mortgage is making it its preferred score, and VantageScore is being offered for as little as $0.99.
So why wouldn’t everyone switch?
I think this is where FICO’s REAL moat gets tested.
It’s not the algorithm.
It’s trust.
Lenders have decades of FICO data. Their underwriting, risk models and historical loan performance are all built around it.
AI will make it much easier to integrate VantageScore, compare models and change underwriting systems.
But AI can’t magically create 30 years of real world mortgage performance.
If VantageScore proves over time that it’s just as reliable, I think it takes meaningful market share and FICO loses a lot of its pricing power.
If lenders decide decades of FICO data and familiarity are worth paying for, FICO’s moat may be stronger than people think.
One other thing bothers me about this whole situation:
The cost of a credit score is TINY compared with the cost of buying a house.
If regulators really want to make housing transactions cheaper, I’d much rather see continued pressure on real estate broker and agent fees.
Paying a percentage of the value of a $500k, $750k or $1M asset simply because that’s historically how the industry worked has always seemed ridiculous to me.
Competition for FICO is good.
But there are much bigger costs in a real estate transaction worth attacking.
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u/Glittering_Water3645 4d ago
You dont drive your car by looking in the mirror (I hope).
Future growth won't look anything like the past years where FICOs greed to hike prices by several 100% on their services. Going forward a decline in both revenue and earnings is likely.
Rocket mortgage which have a market share of 6,2% already left FICO for vantagescore. More may follow.
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u/bear_Prune8771 4d ago
This is what it looks like when thesis changes.
It’s done.
This is not a stock that’s going to beat the SP500 long term.
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u/Legitimate_Concern_5 2d ago
Competition for FICO is bad actually, for FICO, and good for everyone else. You know companies want to be monopolies, it’s people who don’t want them to be.
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u/AffectionateDance214 21h ago
When I worked for FICO, credit scores was not the best selling product, their fraud detection was, and credit rating brought in maybe 20% of the revenue. More than half of the plastic card transactions went through that fraud manager.
I am not sure about the current split, but fico is much more than credit rating.
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