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CHLA Provides April 2024 Update to Rapidly-Rising Credit Scoring Costs

(Washington, D.C.) – The Community Home Lenders of America (CHLA) has provided an update to its January 2024 “White Paper” on the credit-scoring industry and its pricing.  At the time of the White Paper’s publication, recently announced price hikes by Fair Isaac (FICO) for 2024 had not yet worked their way into mortgage origination transactions. The April 2024 update finds that:

  • As written in the White Paper, to say that the FICO cost of a credit pull is only $3.50 is misleading because it’s applied 3 times (or 6 times for joint applicants) in the current tri-merge model, and pulled multiple times in the process (because a credit pull is only valid for 120 days, and home searches and mortgage application processes can last for many months.)
  • Thus—without considering the sunk costs of credit pulls for mortgage applications that did not close—the credit costs incurred to close a loan for a family has risen from roughly $50 in 2022 to $100+ in late 2023 to $150-$250 today.
  • Add in those sunk costs, which have risen from $150-$200 in 2022, to $250-$300 in late 2023, to $360-$475+ today, and the total credit costs per closed loan has now risen from $200-$250 in 2022, to $350-$400 in 2023, and to $510-$725+ today.
  • FICO prices went from $2.00 for a tri-merge in late 2022 to $10.50 for a tri-merge today (that’s the 400% increase; and the Big Three Credit Bureaus tacked on increases as well.)  The scale of these price hikes is unusual in American industry and can only occur when a producer has monopoly or near-monopoly status.
  • FICO’s mortgage revenue was up 147% percent last year and the stock price has more than tripled since the fall of 2022.  By way of comparison, the S&P 500 is up just under 20% during this same period.

Unsurprisingly given the above, on April 25th, FICO announced an 85% mortgage score revenue jump in 1Q 2024, while other of its score channels (auto, card, personal loans) saw no or negative growth.  This 2Q 2024 follows a 1Q 2024 announcement back in January with a 188% mortgage score revenue jump, again while other score channels revenue declined.

“CHLA remains concerned that this government-mandated monopoly will continue to extract more wealth from homebuyers to Fair Isaac shareholders over time. Credit reports and scores are necessary to mortgage lending, and this is a market structure problem that must be addressed. CHLA calls for a full regulatory re-evaluation of these latest price hikes and asks regulators to formulate appropriate actions to limit the harm to consumers and the marketplace.,” said Rob Zimmer, Director of External Affairs with CHLA. CHLA will continue to monitor these developments and issue updates as appropriate.