Equifax is slashing pricing for mortgage lenders who use FICO score alternative VantageScore 4.0 in response to a direct licensing program FICO score provider Fair Isaac has rolled out to eliminate markups charged by credit bureaus.
Equifax, one of the big three nationwide providers of consumer reports, says it will provide VantageScore 4.0 credit scores for $4.50 through 2027.
In addition, Equifax mortgage, automotive, card and consumer finance customers who purchase FICO scores will be able to obtain VantageScore 4.0 credit scores free of charge — so that “lenders can see the value that VantageScore 4.0’s inclusion of alternative data, or information not historically included in traditional credit reports, can bring,” the company said.
VantageScore 4.0 is a credit scoring algorithm developed as an alternative to the FICO score by VantageScore Solutions LLC, a joint venture of Equifax, Experian and TransUnion.
Equifax said in an Oct. 7 announcement that it’s responding to Fair Isaac’s “monopoly-like doubling of their mortgage credit score prices.”
Fair Isaac on Oct. 1 announced that it will charge resellers of tri-merge credit reports $4.95 per score under a direct licensing program that’s aimed at eliminating markups charged by the big three credit bureaus.
But one catch for lenders and borrowers is that Fair Isaac will charge an additional “performance” fee of $33 per borrower, per score if a borrower ends up closing a loan.
Lenders can opt out of the “performance model” and pay a one-time fee of $10 per score, the average price previously charged by credit bureaus, Fair Isaac claims.
Credit bureaus slammed Fair Isaac’s move to cut them out of FICO score pricing. Mortgage industry groups and Fannie Mae and Freddie Mac’s federal regulator, the Federal Housing Finance Agency (FHFA), welcomed the direct licensing program as a positive first step but said further reforms and more competition are needed.
Equifax says its new VantageScore 4.0 pricing promotes credit scoring competition.
Mark Begor
“Equifax is supporting U.S. consumers and our mortgage customers with 2026 VantageScore 4.0 pricing at over 50 percent below FICO’s aggressive 2026 $10 pricing,” Equifax CEO Mark Begor said in a statement. “We are committed to holding the $4.50 score pricing for two years to give lenders the confidence they need to convert to the higher-performing VantageScore.”
Lenders who want to sell mortgages to Fannie Mae and Freddie Mac are currently restricted to using the FICO Classic score that’s been in use for nearly three decades. But the mortgage giants are in the process of updating policies that would allow them to accept VantageScore 4.0, as directed by FHFA Director Bill Pulte in July.
For years, the FHFA had been working on a plan that would have required lenders who work with Fannie and Freddie to start using both VantageScore 4.0 and a new credit scoring algorithm developed by Fair Isaac, FICO Score 10 T, this year.
Both of the new scoring algorithms are more inclusive, considering trended credit data and additional inputs such as rent, utility and telecom payments to help more people qualify for loans, their backers say.
VantageScore 4.0 and FICO Score 10 T are already being used by lenders to evaluate loans that they don’t intend to sell to Fannie and Freddie. But the timeline for rolling out the new scoring algorithms for loans eligible for purchase by Fannie and Freddie was suspended in January.
Once Fannie and Freddie are ready to start accepting VantageScore 4.0, as directed by Pulte, the algorithm will go head-to-head with the less inclusive FICO Classic score. Although the FHFA validated FICO Score 10 T and VantageScore 4.0 for use by Fannie and Freddie in 2022, lenders still need access to historical FICO Score 10 T data before Fannie and Freddie will accept it.
Chi Chi Wu
The FHFA’s current plan to pit VantageScore 4.0 against the older FICO Classic score could drive Fair Isaac out of the market and make “anti-competitive nature of the credit scoring market even worse,” the National Consumer Law Center’s Chi Chi Wu has said.
Analysts at the American Enterprise Institute (AEI) have warned that allowing lenders, Realtors and borrowers to choose the more favorable score could encourage “score shopping,” leading to “more approvals, looser credit, and greater default risk, while leaving vulnerable borrowers with unsustainable debt.”
What about tri-merge reporting?
Another component of the FHFA’s original plan that’s fallen by the wayside is a planned transition from tri-merge to bi-merge reporting, which would allow lenders to score borrowers using data from two credit bureaus instead of three.
Credit bureaus maintain files on consumers that track their debts and repayment histories, and that information is fed into credit score algorithms like FICO Classic and VantageScore 4.0 to generate credit scores. Credit bureaus charge a fee for accessing a borrower’s credit files, and Fair Isaac and VantageScore charge royalties for the right to run borrower’s credit histories through their scoring algorithms.
The Mortgage Bankers Association maintains that requiring lenders to pull credit reports from all three credit bureaus creates additional costs but delivers “scant tangible benefits.”
Tri-merge reporting “is an outdated relic of a time when data was fragmented and inconsistent, leading to significant disparities between the reports that the different credit reporting agencies produced,” MBA President Bob Broeksmit said in August.
The MBA has been studying the feasibility of allowing lenders to use a single credit report to generate credit scores for Fannie and Freddie, FHA, VA and USDA loans.
“If the goal is to save consumers money, perhaps the better question is [not Fair Isaac’s pricing but] whether a tri-merge credit report is even necessary today,” AEI analysts Tobias Peter and Sissi Li agreed in a September op-ed.
“A typical tri-merge credit report costs $80–$100, paid to a reseller,” Peter and Li wrote. “To create it, the reseller purchases credit files from each of the three repositories at $13–$25 apiece. Each repository then pays FICO roughly $5 in royalties — about $15 total. In the context of thousands of dollars in closing costs, FICO’s share is marginal at best.”
TransUnion has opposed moving away from tri-merge reporting, claiming Fannie Mae and Freddie Mac could lose out on up to $4 billion in risk-based interest fees annually if borrowers were able to obtain better rates than their “true risk” would merit.
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