New lender moves put FICO models back in focus
Arvest Bank has adopted FICO Auto Score 10, while several mortgage lenders have joined the FICO Preferred Program, according to Simply Wall St. The moves give Fair Isaac new customer activity as lenders reassess the credit-scoring systems used in consumer lending.
A credit score is a numerical assessment of a borrower’s credit history that lenders may use when reviewing an application. Different products can use different models. An auto-loan score, for example, is designed for decisions involving vehicle financing, while mortgage lenders have historically relied on specific scores and requirements set within the housing-finance system.
The developments come during a broader shift in mortgage credit scoring. Simply Wall St. said Fair Isaac faces pressure from mortgage-related regulatory changes and competition from VantageScore 4.0. Fannie Mae and Freddie Mac have moved toward allowing lenders to use VantageScore 4.0 alongside established FICO models, changing the competitive environment for companies that supply scores to mortgage lenders.
That transition does not mean every lender will use the same model or that every borrower will receive the same score. A lender’s underwriting process, the type of credit being sought and the model selected can all affect which score is reviewed. The report identified several mortgage lenders as new participants in FICO’s program but did not name them.
| Company or program | Development reported |
|---|---|
| Arvest Bank | Adopted FICO Auto Score 10 |
| FICO Preferred Program | Several mortgage lenders joined |
| VantageScore 4.0 | Growing competition in mortgage scoring |
Why the scoring changes matter
Fair Isaac’s FICO Score is used by lenders to help measure credit risk, but the company offers multiple versions for different lending decisions. A change in the model used by a lender can alter how information in a consumer’s credit history is evaluated, even when the underlying report has not changed. The adoption of FICO Auto Score 10 therefore concerns automobile lending rather than automatically changing the general-purpose score a consumer sees.
The mortgage developments are particularly significant because home loans typically involve large balances and long repayment periods. FICO’s Preferred Program is part of the company’s effort to maintain relationships with mortgage lenders as the industry considers more scoring options. The reported lender participation is a corporate and product decision; it does not establish that all mortgage lenders will use the same scoring approach.
Fair Isaac’s recent customer activity follows a difficult period for the company’s stock. Simply Wall St. reported that the shares were trading at $711.23, with a year-to-date return down 56.72% and a one-year total shareholder return down 57.14%. Those market figures reflect investor performance and are separate from the credit scores lenders use to evaluate consumers.
The company’s software business is also shifting toward cloud-based products. The report said FICO Platform annual recurring revenue had reached $413 million, representing more than half of software annual recurring revenue. It also reported platform dollar-based net retention of 148%, a measure of how recurring revenue from existing customers changes over time. These figures describe Fair Isaac’s business, not the credit standing of individual borrowers.
- Arvest Bank adopted FICO Auto Score 10 for auto-lending decisions.
- Several mortgage lenders joined FICO’s Preferred Program as competition from VantageScore 4.0 grows.
- Consumers may be evaluated under different scoring models depending on the lender and type of credit.
