# FICO (FICO)

Sector: Credit scoring & analytics software

| Field | Value |
|---|---|
| Price | $758.54 |
| Fair value (Analysts) | $970.00 |
| Discount to fair value | 21.8% |
| Fair value uncertainty (Analysts) | High |
| Economic moat (Analysts) | Wide |
| LSEG analyst rating (1 strong buy to 5 strong sell) | 2.39 |
| Data as of | 2026-10-15 |
| Next earnings | 2026-10-29 (estimate) |

## In short

The housing regulator now prices FICO and the cheaper VantageScore the same, and the gap closes only if mortgage score revenue holds up as lenders choose over the next several years.

## Themes and gap

- Themes: Regulation and courts (regulation-legal), Interest rates (interest-rates), High debt (leverage)
- Gap type: Slow (slow)
- Why: Lenders choose between FICO and VantageScore loan by loan, so only several years of quarterly mortgage score data can show that FICO keeps its share.

## About

Fair Isaac (FICO) makes the FICO Score, the standard measure of consumer credit risk in the US, which 90% of the top US lenders use. FICO earns a fee each time a lender pulls a score, mostly through the three credit bureaus (Equifax, Experian and TransUnion), and it also sells scores to consumers through partners. Scores gave about 68% of revenue in the quarter to June 30, 2026, with a segment operating margin of about 90%. Mortgage origination scores are the main driver of growth, because FICO raised their unit price. The second segment, Software, sells analytics and decision software to banks and other companies, mostly as subscriptions, and its platform recurring revenue grew 62% in the year to June 30, 2026. FICO had 3,876 employees at June 30, 2026, and it uses most of its free cash flow and new debt to buy back its own shares.

## Thesis

FICO trades at a discount because the US housing regulator is removing the special place of the FICO Score in mortgages, and the market fears that lenders will move to the cheaper VantageScore 4.0. FICO's recent growth came mostly from higher prices for mortgage scores, and in the quarter to June 30, 2026, Scores revenue grew 41%. On September 28, 2026, FHFA Director Bill Pulte said that Fannie Mae and Freddie Mac will use one pricing grid for FICO and VantageScore, and the Freddie Mac bulletin said that fees will not change with the score model from October 1, 2026. The three credit bureaus, which own VantageScore, sell it for about $1 per mortgage score. Rocket Mortgage said that it will make VantageScore 4.0 its preferred model for eligible loans. The shares fell about 27% on September 29, 2026. For the gap to close, FICO must show that lenders and mortgage bond investors keep using the FICO Score, so that mortgage score revenue holds up in the fiscal 2027 outlook and in the quarters after Rocket's switch. Software platform revenue must also keep growing fast. The first test is the fiscal Q4 2026 report, expected at the end of October 2026, with the fiscal 2027 outlook. The next test is the fiscal Q1 2027 report, expected in early 2027, which shows the first full quarter of the new pricing grid. The gap can close only over several years, as quarterly data show how many lenders switch. The main risk is that a large share of mortgage lenders move to VantageScore and FICO must cut its prices.

## Checkpoints

- Oct 29, 2026 (estimate): Fiscal Q4 2026 results and fiscal 2027 outlook. Status: Pending. Watch: A fiscal 2027 outlook with growth in Scores revenue and comments that lenders keep pulling FICO Scores pass; an outlook with lower mortgage score revenue or a price cut fails.
- Feb 2027 (estimate): Fiscal Q1 2027 results: first full quarter of the single pricing grid. Status: Pending. Watch: Stable or higher mortgage origination score revenue after Rocket's switch passes; a fall in mortgage score volume that is larger than the fall in mortgage applications fails.
- May 2027 (estimate): Fiscal Q2 2027 results: lender choice and Software growth. Status: Pending. Watch: Mortgage origination score revenue that holds up for a second quarter under the single grid, with platform ARR growth above 30%, passes; a further fall in mortgage score volume or a price cut fails.

## Balance sheet

- Cash: $248M
- Debt: $5.6B
- Net debt: $5.4B
- Interest cover: 6.8×
- Undrawn credit line: $290M, to May 2030
- Debt due within 12 months: $300M
- Last debt due: 2034

FICO had $5.61 billion of debt principal at June 30, 2026: $3.40 billion of senior notes, a $1.50 billion term loan and $710 million drawn on its $1.0 billion revolving line of credit. The notes are $900 million at 4.00% due June 15, 2028, $1.5 billion at 6.00% due May 15, 2033, and $1.0 billion at 6.25% due September 15, 2034, which FICO issued on March 20, 2026 and used to repay the 2018 notes. The term loan matures on May 15, 2028 and is repaid in quarterly installments of $75 million through June 2027 and $112.5 million after that. The revolving line matures on May 13, 2030, and both carry floating rates based on SOFR. FICO borrowed the term loan on June 5, 2026 to fund a $1.5 billion accelerated share buyback. Interest cover is operating income divided by net interest expense of $146 million for the nine months to June 30, 2026. The stockholders' deficit was $4.10 billion at June 30, 2026, because of many years of buybacks.

As of 2026-06-30.

Sources:

- https://www.sec.gov/Archives/edgar/data/814547/000081454726000030/fico-20260630.htm
- https://www.sec.gov/Archives/edgar/data/814547/000081454726000031/exhibit991erq32026.htm
- https://www.sec.gov/Archives/edgar/data/814547/000119312526260817/d140061d8k.htm

## Recent events

- 2026-10-06: FICO said it will cut about 15% of its positions to remove management layers and use AI in product development. It expects about $27.0 million of pre-tax charges in fiscal Q4 2026, and it expects to complete the plan by the end of fiscal Q3 2027.
- 2026-09-30: Fannie Mae and Freddie Mac published new loan-level price rules. Freddie Mac said that credit fees will not change with the score model, FICO or VantageScore 4.0, for loans delivered from October 1, 2026.
- 2026-09-29: The shares fell about 27% after FHFA Director Bill Pulte said on September 28 that Fannie Mae and Freddie Mac will use one pricing grid for FICO and VantageScore. FHFA did not give a start date in that post. Rocket Mortgage said that it will make VantageScore 4.0 its preferred model for eligible loans.
- 2026-07-29: FICO reported fiscal Q3 2026 results. Revenue was $674 million, up 26%. GAAP EPS was $10.45 and non-GAAP EPS was $12.18. Scores revenue grew 41%, mostly from a higher unit price for mortgage origination scores. FICO raised its fiscal 2026 revenue guidance to $2.53 billion from $2.45 billion.
- 2026-06-08: FICO borrowed a $1.5 billion term loan and used it for a $1.5 billion accelerated share buyback with Wells Fargo, to be completed by September 30, 2026. It replaced its buyback program with a new $2.0 billion program.
- 2026-04-28: FICO reported fiscal Q2 2026 results. Revenue was $692 million, up 39%, and GAAP EPS was $11.14. Scores revenue grew 60% from a higher mortgage score price and more mortgage originations. FICO raised its fiscal 2026 revenue guidance to $2.45 billion from $2.35 billion.

## Risks

- High: Since October 1, 2026, Fannie Mae and Freddie Mac charge the same fees for loans with a FICO Score or a VantageScore 4.0. The credit bureaus sell VantageScore for about $1 per mortgage score, and Rocket Mortgage plans to prefer it for eligible loans. If many lenders switch, FICO loses volume in its most profitable product and can be forced to cut prices.
- High: The FHFA Director can change mortgage score rules quickly, and political pressure on credit score prices is high. In 2026, the FHFA first let all approved lenders use VantageScore 4.0 and then removed the price difference between the two scores. More changes can come without much notice.
- Medium: Mortgage score revenue depends on the number of mortgage applications. Higher mortgage rates lower home sales and refinancing, and this lowers the number of scores lenders pull.
- Medium: FICO has high debt and a stockholders' deficit of $4.10 billion at June 30, 2026, because it funded buybacks with debt. Debt rose to about $5.61 billion after the $1.5 billion term loan in June 2026. If score revenue falls, debt becomes larger compared with profit.
- Low: FICO cuts about 15% of its positions from October 2026, and it uses more AI in product development. The cuts can slow product work or customer service while the plan runs to fiscal Q3 2027.

## Links

- Page: https://picks.kamadorueda.com/company/FICO/
- History of changes: https://picks.kamadorueda.com/company/FICO/history/
- JSON with full history: https://picks.kamadorueda.com/data/company/FICO.json

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