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FICO Stock Plummets as Rivals Gain Ground
23 Apr
Summary
- Mortgage giants will now accept alternative credit scores.
- FICO's dominance in credit scoring is being challenged.
- This move aims to lower costs for consumers seeking mortgages.
Fair Isaac (FICO) shares experienced a significant decline of over 13% following a recent announcement by federal agencies. Mortgage giants Fannie Mae and Freddie Mac, along with the Federal Housing Administration (FHA), will now accept alternative credit scoring models for mortgage loans. This policy shift, developed over time, intends to diminish FICO's extensive influence in credit scoring for mortgage approvals and subsequently decrease expenses for consumers.
Federal Housing Finance Agency Director Bill Pulte and Housing and Urban Development Secretary Bill Turner revealed that Fannie Mae and Freddie Mac will immediately recognize VantageScore 4.0. They will also accept an updated FICO scoring model, known as 10T. The FHA, which insures loans for many first-time homebuyers, is expected to adopt these alternative scores shortly. Both FICO and VantageScore 4.0 utilize alternative data, such as rent payments, to assess creditworthiness.
