Credit score cost increases can't be blamed on resellers, NCRA says

Credit report resellers are telling the world not to blame them for FICO's increase to the costs of generating a credit score.

The resellers are merely passing along the increases they have been given by the three bureaus — Equifax, Experian and TransUnion.

"While resellers may adjust their fees to reflect these changes, the substantial increases do not stem from the resellers. Resellers have little control over pricing, as they must pay the Bureaus prices," a statement from the National Credit Reporting Association said.

The statement is titled "Setting the record straight on credit score price increases."

Earlier this month, FICO, whose legal name is Fair Isaac Corp., increased its royalty, per borrower, per bureau, for the third consecutive year.

While changes proposed by current Federal Housing Finance Administration Director Sandra Thompson would open the way to competition between FICO and VantageScore, those are still in process. Those would not necessarily eliminate the need for mortgage lenders to pull a FICO-generated score.

The proposals have called for lenders to be able to pull a bi-merge report, rather than the tri-merge, but would have to use both FICO and VantageScore.

But even if both algorithms were to be used, the invoices the resellers receive are from the three bureaus, explained Heather Russell-Schroeder, NCRA president, in a follow up interview.

"We don't get our pricing from FICO, we do not pay FICO, we pay the repositories," Russell-Schroeder said. "So all price increases come to the reseller channel through the repositories."

Because the government-sponsored enterprises currently mandate tri-merge reports from those three entities, no true competition exists, she continued.

Furthermore, because of contractual arrangements with the bureaus, the resellers are unable to disclose what their costs are or how slim the margins are.

"We, the reseller community, is where there is actual competition in the marketplace," Russell-Schroeder, who is also president of Credit Information Systems, said. "The data is the data is the data… the score is the score is the score. But where we can compete is service."

Some of the bureaus specialize with the mortgage broker channel, while others are heavy into working with banks and credit unions. Where they can compete is on the service levels they provide, she said.

Even though the industry is much smaller today than 20 years ago due to consolidation, the statement noted, it is still very competitive. Today, approximately 30 independent companies operate, versus 300 less than two decades ago.

But they are all stuck with the same base cost from the resellers, with very little wiggle room, Russell-Schroeder said.

Even with the consolidation, the resellers still have a competitive marketplace, agreed Rob Zimmer, head of external affairs at the Community Home Lenders of America.

"Unlike what you have at the very top, where it's an absolute monopoly," Zimmer said. "And so in that situation, the pricing power will always rest primarily with a monopoly provider."

CHLA does not blame the resellers for the price increases.

"We do understand that everyone in the chain has to look at the pricing scenario that works for them," said Zimmer. "But again, they don't have the same pricing power as Fair Isaac; Fair Isaac has unilateral pricing power, they pick the music and everyone's got to dance after that." It is an arcane part of the business, and the market will have to see where the second Trump Administration comes out on this issue, he said.

A post-election report from the Kroll Bond Rating Agency speculated that the next government could delay or indefinitely suspend the credit score modernization efforts.

But it was a bipartisan Congress, which as far back as 2017 was agitating for the use of credit scoring models beyond FICO, Zimmer noted.

At the time the price increase was confirmed, the Mortgage Bankers Association put out a statement focusing on FICO and the credit reporting agencies, saying while they were "free to set their prices as they wish, their flawed or mostly opaque reasoning for raising prices on a long-established product is unacceptable.

"Furthermore, justifying the price increases by focusing on total closing costs is not the right approach," the statement from President and CEO Bob Broeksmit continued. "Consumers lose, and lenders are left absorbing the cost for the majority of times they pull an applicant's credit and a closed loan doesn't result."

National Mortgage News reached out to the three bureaus for a response to the statement but had not received one by press time.

"The NCRA continues to advocate for equitable pricing practices within the industry and urges FICO and the Bureaus to provide transparency for these significant price increases," its statement concluded.