TransUnion fires latest volley in credit-score price war

TransUnion has further slashed its mortgage origination price for VantageScore 4.0, a metric the government-related secondary market is seeking to promote as an alternative to traditional measures available from FICO.

The considerably lower $0.99 price is down from $4, which already was a 50% discount relative to earlier pricing, said Satyan Merchant, the company's senior vice president and mortgage business leader. TransUnion also continues to offer 4.0 free to any lender who pays for a FICO score.

The move follows a broader price war for ability-to-repay metrics spurred in part by Bill Pulte, director of the Federal Housing Finance Agency, who has sought to move forward a legislative scoring modernization mandate in the secondary market while encouraging provider rivalries.

"One of the objectives of the FHFA is to drive this score competition. We wanted to accelerate the mission of score competition," Merchant said. "By reducing the price of the score that we do control, we also can spur affordability and lender choice."

Ups and downs

TransUnion's price reduction follows a series of cuts and hikes for credit scores and reports, which are interrelated measures used to gauge consumers' ability to repay in the mortgage market. 

Fannie Mae and Freddie Mac, the large government-related entities the FHFA oversees, traditionally have required FICO scores and tri-merged reports from three major credit bureaus to be used in loan sales. Transunion, Experian and Equifax created VantageScore as an alternative to FICO.

Experian recently increased the costs of the credit reports it provides for mortgages by around $3 per borrower, bringing costs that vary by customer to more than $30 per score, according to LinkedIn posts by Greg Sher, managing director of NFM Lending.

That credit bureau had not immediately responded to attempts to confirm this pricing increase at the time of this writing.

A TransUnion spokesman said in an email Monday that the company has not changed pricing for its reports. 

A third credit bureau, Equifax, announced Monday afternoon that it reduced the price of VantageScore 4.0 by 90% to $1 for mortgages. It also will continue to be free to customers across mortgage, automotive, card and consumer finance customers who buy FICO metrics.

"With today's announcement we are rising to FHFA Director Pulte's challenge to also make mortgage costs more affordable," Equifax CEO Mark Begor said in a press release.

Over 250 lenders have accepted free VantageScores in conjunction with their FICO purchases either in or outside the government-sponsored enterprises' market, according to Begor.

"More than 40 non-GSE lenders are in production with only VantageScore for some of their portfolios," he added.

Equifax also is providing an employment and income verification indicator and alternative data such as telecom and paid television track records with consumer credit reports, said Joel Rickman, general manager and senior vice president of US mortgage and verification services.

"The greater visibility we provide allows for more efficient underwriting and can help open new homeownership opportunities," Rickman said in the press release.

Equifax cut the price of VantageScore 4.0 to a little over $4 last year and reported that FICO increased the cost of the score used for mortgages up to $10 from $4.95.

Experian subsequently offered VantageScore for free on an introductory basis with a pledge to price it at half of what FICO charges.

Merchant said TransUnion's current $0.99 pricing for VantageScore 4.0 is something the company will continue to evaluate as time passes.

Market drivers

FICO has attributed any upticks in its own pricing to hikes by the three bureaus, which in turn point fingers at the traditional provider of scores used in the mortgage market. FICO instituted a strategy last year aimed at bypassing the bureaus.

Both score and report providers contribute to the net costs of their interrelated products. Credit bureaus provide reports related to consumer repayment histories. These then get run through FICO and VantageScore's risk models. 

Pulte, who refers to the FHFA as U.S. Federal Housing, has been critical of price hikes by FICO and the credit bureaus. Both have faced limited competition in the secondary mortgage market.

The Mortgage Bankers Association has sought an alternative to the tri-merge. Research on whether it would make a statistically significant difference to borrowers or not has produced mixed results. The Community Home Lenders of America has questioned how much it would do to cut costs.

To date FICO's traditional scores are still broadly used in the market the FHFA oversees and modernization has been slow. That market generally has expressed a need to get comfortable with alternative measures before using them.

The FHFA has been working to make data available for this, and Merchant said TransUnion has been selling an artificial intelligence-driven analytics platform that can be used for that purpose. It is priced based on the scope of clients' larger business relationship with the company.

Pulte appears to be leaning toward a "lender choice" model where an advanced metric from either VantageScore or FICO could be used in modernization, but use of both also has been contemplated.

Alternatives to the tri-merge are not part of the legislatively mandated score modernization but the FHFA has considered adding them to the mix.