Fair Isaac shares suffered their sharpest one-day decline in decades Tuesday as investors confronted a more immediate threat to FICO’s lucrative position in mortgage credit scoring. The stock closed at $617.87, down roughly 27%, after Federal Housing Finance Agency Director Bill Pulte said Fannie Mae and Freddie Mac would move toward a single mortgage pricing grid that places VantageScore alongside FICO Classic. The decline deepened substantially from an 18% premarket drop and marked FICO’s worst session since 1989.
The policy announcement alone was not the only concern. Rocket Mortgage said it will make VantageScore 4.0 its preferred scoring model for eligible mortgages beginning in the fourth quarter, turning a regulatory opening for FICO competition into a tangible shift by the country’s largest mortgage lender. After roughly four months of testing, Rocket said VantageScore allowed more customers to satisfy credit requirements while reducing scoring costs.
The combination raises a more consequential question for Fair Isaac than whether FICO remains an approved mortgage score: how much pricing power and transaction volume the company can retain once major lenders have a viable alternative.
The Mortgage Shift Was Already Underway
Monday’s announcement did not suddenly authorize VantageScore for the first time. FHFA had already expanded VantageScore 4.0 to all approved Fannie Mae and Freddie Mac lenders on September 9, removing an earlier requirement for written approval. Lenders can currently choose either Classic FICO or VantageScore 4.0 for eligible loans sold to the government-sponsored enterprises.
The latest change addresses another part of the economics. Pulte said Fannie and Freddie would replace separate pricing grids with one grid incorporating both models. Because the enterprises use those grids to determine upfront fees on mortgages they acquire, eliminating different treatment between the two scoring systems could make the decision more directly about cost, underwriting performance and lender preference.
Important implementation details remain unresolved. Pulte’s announcement did not specify when the unified grid will take effect, and a replacement pricing matrix had not been published as of Tuesday. Classic FICO also remains approved, while FHFA continues to plan for eventual adoption of FICO Score 10T. The agency has not announced a retirement date for Classic FICO.
Rocket Makes the Competitive Threat More Concrete
Rocket’s decision provides investors with an early look at how lenders may behave once the competing models can be used more freely. Beginning in the fourth quarter, Rocket plans to default to VantageScore 4.0 for mortgages delivered to Fannie Mae and Freddie Mac, VA loans and other eligible products. The company said it has already obtained 1.4 million credit reports using both VantageScore and FICO this year while evaluating the models.
Rocket said borrowers who saved money through VantageScore during its testing saw average closing savings of about $1,600, although that figure applies only to customers who realized savings and should not be interpreted as the expected benefit for every borrower. Investment-property mortgages, second homes, home-equity loans, FHA loans, jumbo mortgages and some other products will continue using FICO for now, while Rocket’s wholesale mortgage operation will continue offering brokers both scoring options.
Those exceptions limit the immediate revenue exposure for Fair Isaac, but Rocket’s willingness to make VantageScore the default on a meaningful portion of its business is more significant than lenders merely having permission to test an alternative. If other large originators reach similar conclusions, competition could pressure both the number of FICO scores purchased and the prices Fair Isaac can charge for them.
FICO’s Recent Growth Shows What Is at Risk
The concern is amplified by how important scoring has become to Fair Isaac’s financial performance. FICO generated $674.2 million of revenue in its fiscal third quarter, up 26% from a year earlier. Scores revenue increased 41% to $458.9 million, accounting for roughly 68% of company revenue, while business-to-business scoring revenue climbed 49%.
FICO specifically attributed the B2B increase primarily to higher mortgage-origination score pricing. That makes the competitive shift particularly relevant: the part of FICO’s business producing some of its strongest recent growth is also the part facing new alternatives and aggressive pricing from the credit bureaus. TransUnion and Experian have each offered VantageScore 4.0 mortgage scores for $0.99, creating a substantial pricing contrast with FICO’s mortgage products.
Fair Isaac was still producing strong earnings before the latest developments. Third-quarter net income rose to $237.2 million from $181.8 million a year earlier, free cash flow reached $370.3 million and management raised fiscal 2026 revenue guidance to $2.53 billion with adjusted earnings of $42.43 per share. Because FICO’s fiscal year ends September 30, the new mortgage developments are more consequential to the company’s future growth and pricing assumptions than to the year that is effectively ending now.
FICO is not disappearing from mortgage underwriting. Its newer FICO 10T model remains part of the industry’s transition, and FHA-approved lenders are scheduled to gain access to FICO 10T beginning January 1, 2027. What has changed is the competitive structure around the business: lenders now have greater freedom to choose between scoring systems, a major originator has committed to using the alternative by default on eligible loans, and the pricing framework for mortgages sold to Fannie and Freddie is moving toward equal treatment.
The next evidence investors need will come from adoption rather than announcements. The pace at which other large lenders follow Rocket, the final structure and effective date of Fannie Mae and Freddie Mac’s unified pricing grid, and FICO’s response on mortgage-score pricing will determine whether Tuesday’s selloff reflects a substantial long-term erosion of the Scores business or a faster repricing of competitive risk than the eventual revenue loss warrants.