Fair Isaac stock plunges 20% after Fannie and Freddie open door to FICO credit score rival

Stock in Fair Isaac Corp. ( FICO ) fell sharply on Tuesday after Federal Housing Finance Agency Director Bill Pulte announced a change in mortgage pricing, introducing competition to FICO Score's long hold on mortgage lending.

Fair Isaac stock was down more than 20% shortly after the open.

Late Monday, Pulte posted on X that mortgage giants Fannie Mae and Freddie Mac would move to a single pricing grid that includes VantageScore, a FICO competitor. Fannie and Freddie support about 70% of the mortgage market, and for decades, FICO was the only credit score they accepted for borrowers seeking financing.

"We are Simplifying Mortgage Pricing following feedback from lenders and consumers. Instead of two separate pricing grids, which makes zero sense, Fannie and Freddie are hereby moving to ONE PRICING GRID with VantageScore joining the existing FICO Classic pricing grid," Pulte wrote.

Pulte also shared an announcement from the CEO of Rocket Mortgage ( RKT ), with the lender saying it will begin accepting VantageScore as its preferred model.

"The mortgage industry has relied on one credit scoring model for decades. Competition is healthy, especially when it can lower costs and expand responsible access to homeownership. We did the work, compared the models and chose the one that helped more qualified clients," Rocket Mortgage CEO Jay Bray said.

VantageScore is a joint venture of the three credit bureaus Equifax ( EFX ), TransUnion ( TRU ), and Experian ( EXPN.L ). Those stocks were also down in early trading.