Although the first commercial credit-scoring system was developed in 1958 by Bill Fair and Earl Isaac, the FICO score as we know it emerged in 1989. The next key moment happened in 1995, when Fannie Mae and Freddie Mac began strongly incorporating FICO scores into their mortgage underwriting systems.
For roughly three decades, FICO was the dominant credit-scoring model used in the Fannie Mae and Freddie Mac mortgage channel. Not anymore.
VantageScore launched in 2006 but did not have the same access to the Fannie Mae and Freddie Mac market until this year.
The rule changes implemented by the Federal Housing Finance Agency (FHFA) during 2026 have opened the door to greater competition between FICO and VantageScore within the Fannie Mae and Freddie Mac system.
Then, in September, wider lender access to VantageScore added to the pressure on Fair Isaac Corporation (NYSE: FICO), the owner of the FICO score.
Fannie Mae and Freddie Mac move to “one pricing grid” with VantageScore
FHFA director William J. Pulte confirmed on Sept. 28 that Fannie Mae and Freddie Mac would move to “ONE PRICING GRID,” with VantageScore joining the existing FICO Classic pricing grid.
“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 in a post on X (the former Twitter).
Before this change, the system effectively treated VantageScore differently from FICO.
United Wholesale Mortgage eliminated the 20-point adjustment it previously applied to VantageScore for new loans, effective Sept. 30, according to National Mortgage Professional.
Fannie Mae and Freddie Mac aligned pricing across Classic FICO and VantageScore, effective Oct. 1.
With this change and the new single mortgage-pricing grid, lenders can now pull a VantageScore instead, which could erode FICO’s decades-long dominance.
The day after Pulte’s announcement, FICO shares plummeted.
FICO shares drop 27% in worst single-day decline since 1989
Until now, lenders originating mortgages backed by Freddie Mac or Fannie Mae generally had to obtain a Classic FICO score for each borrower, so FICO earned a fee on every score pulled.
Fair Isaac Corporation shares dropped 27% on Tuesday, Sept. 29. This marked FICO’s worst single-day decline since 1989, according to Barron’s.
The drop added to a decline FICO shares had already suffered earlier in September.
The stock began to rebound, gaining 11% on Thursday, Oct. 1, but it is still down 60.86% year to date.
At the time of writing, in the Friday, Oct. 2, pre-market session, FICO shares were trading 6.46% below the Oct. 1 close, at $619 per share.
Rocket Mortgage makes VantageScore 4.0 its preferred credit model
On Sept. 28, the day before FICO stock crashed 27%, Rocket Mortgage, part of Rocket Companies (NYSE: RKT), announced it would become what it says is the first mortgage lender to use VantageScore 4.0 as its preferred credit scoring model for all eligible loans.
“After roughly four months of testing, the company found that VantageScore helped more clients qualify and move forward in the mortgage process, while also reducing credit scoring costs,” the company stated in the official press release.
Rocket Mortgage analyzed 1.4 million credit reports to compare how VantageScore 4.0 and FICO perform in mortgage lending. The company said its analysis found that VantageScore can expand access to mortgages while, in some cases, giving borrowers better pricing.
Rocket Mortgage study key findings:
- More borrowers: VantageScore 4.0 opened access to mortgages for some applicants who otherwise might not have qualified.
- 1,600 average savings among those who saved: Borrowers who got better pricing with VantageScore saved an average of $1,600 at closing.
- Better pricing: Some borrowers received more favorable mortgage terms when evaluated with VantageScore 4.0.
- More credit information: The model can consider rent and utility payments when they appear in a consumer’s credit file.
- Limited credit histories: Some consumers who would not receive a score under conventional models can receive one using VantageScore 4.0.
Rocket Mortgage says the findings support its decision to move toward VantageScore 4.0 as its preferred scoring model for eligible loans while continuing to evaluate new scoring technologies.
“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,” stated Jay Bray, CEO of Rocket Mortgage.
Related: Zillow, Redfin speak bluntly on mortgage rates, housing market
Analysts weigh in on FICO stock
While the rule change could challenge FICO’s long-standing position in mortgage credit scoring, analysts disagree about how many and how quickly lenders will shift away from FICO.
Bank of America (BofA) halved its FICO price target to $700 from $1,400 and downgraded the stock to Neutral.
BofA’s analysts said the decision “removes a key distinction between the models, and follows a series of regulatory developments,” adding that “the revised grid adds another risk to score volumes, pricing, and market share,” as reported by 24/7 Wall St.
FT Partners analyst Craig Maurer says the change removes a financial disadvantage that previously made lenders less likely to use VantageScore. If VantageScore gives a borrower a higher score than FICO, the borrower’s loan can now potentially be priced better if the lender uses it, according to Investing.com.
TD Cowen’s Jaret Seiberg is more critical. He argued that the new system could effectively lower loan-level price adjustments (the fees tied to credit score), because more borrowers may qualify for better terms under VantageScore.
He also questioned why FHFA now treats the two models equally after previously indicating that VantageScore typically produced results roughly 20 points higher than comparable FICO scores. Seiberg says the change could increase risk for Fannie Mae and Freddie Mac.
Seiberg also pointed to an important protection for FICO: The mortgage-backed securities market may still require FICO scores. If so, lenders could pull both scores, allowing VantageScore to gain market share while FICO retains much of its existing volume.
RBC’s Ashish Sabadra sees another risk: “score shopping.” Lenders could compare the two models and use whichever produces the more favorable result for a borrower.
“Another risk is FICO may need to hasten its shift away from traditional per-pull origination fees toward other pricing structures to defend its economics,” according to Sabadra, and as reported by Investing.com.
Overall, the analysts quoted agree the single grid strengthens VantageScore’s competitive position, though they differ on how much damage it will do to FICO.
