Fair Isaac's Dominance in Mortgage Credit Scoring Could be Challenged by New Grid Structure, BofA Says in Downgrade

02:13 PM EDT, 09/30/2026 (MT Newswires) -- Fair Isaac's (FICO) dominance as a credit-score provider in the mortgage industry could be challenged, as a unified pricing grid that includes VantageScore emerges, BofA Securities said Wednesday. Late Monday, US Federal Housing Finance Agency Director Bill Pulte announced a measure to simplify mortgage pricing by placing the VantageScore 4.0 model and the Classic FICO system into one pricing grid. Two separate pricing grids "makes zero sense," with Fannie Mae and Freddie Mac moving to one grid, Pulte said in a post on social media platform X. The unified grid eliminates the previous 20-point deduction applied to VantageScore when determining loan-level pricing adjustments, or LLPAs, BofA said in a note to clients Wednesday. The original adjustment was meant to account for differences in score construction between the two models, according to the brokerage. "The move removes a key distinction between the models and follows a series of regulatory developments that may challenge (Fair Isaac's) historically dominant mortgage market position," BofA analyst Curtis Nagle said. "Simply put, equivalent (VantageScore) and Classic FICO scores will now receive the same LLPA treatment, potentially enabling lenders using (VantageScore) to achieve more favorable loan pricing than under the prior framework and increase the incentive to test or adopt (VantageScore 4.0)," the analyst wrote. VantageScore is operated by VantageScore Solutions, which is a private joint venture owned by Equifax (EFX), TransUnion (TRU) and Experian. BofA downgraded its rating on the Fair Isaac stock to neutral from buy, and slashed its price target by half to $700. Fair Isaac shares were down 5% in Wednesday afternoon trade, following a nearly 27% plunge in the previous session. The stock has lost 65% in value so far this year. Equifax shares were down 2.1% intraday Wednesday, while TransUnion lost 3.9%. On Monday, Rocket Mortgage, a unit of Rocket Cos. (RKT), announced VantageScore 4.0 as its preferred credit scoring model for all eligible loans, starting in the fourth quarter. Another major mortgage lender, UWM Holdings (UWMC), has also expressed optimism around that model, BofA said Wednesday. "While the pace of lender adoption remains uncertain, we believe the revised grid adds another risk to score volumes, pricing, and market share, on top of less leeway on headline score price increases given high and (persistent) regulatory scrutiny," Nagle wrote in the note. The decision by the FHFA could also "amplify gaming and dual score pulling," according to BofA. That practice likely is already common and could help continue to preserve Fair Isaac's share under the new grid structure, the brokerage said. "Given fewer visible avenues to offset potential pressure on score volumes and pricing, we see limited opportunities for rerating until the regulatory backdrop and (Fair Isaac's) next phase of growth become clearer," Nagle wrote. Price: 592.81, Change: -25.06, Percent Change: -4.06