🎙️ Val’s Vibe Episode 12: The Rising Cost of Credit Reports – What You Need to Know

 The credit reporting industry is experiencing significant price hikes, with costs trickling down through the reseller market—but why? In this episode, Valerie dives into the key factors driving these increases, from FICO and credit bureaus to the new VantageScore model.

💡 Key Takeaways:
✔️ Why mergers and declining loan volume are driving up credit report costs
✔️ The potential shift to VantageScore and bi-merge reports – what it means for lenders
✔️ Why the industry should advocate for single bureau reports to cut costs
✔️ How trade associations and professionals can push for real reforms

🔜 Next Week: Valerie breaks down AI’s impact on mortgage lending with insights from the NMLS User Conference in Atlanta.

🎧 Tune in now and stay ahead in the mortgage industry! 

Transcript

  📍 Hey everybody, welcome to Val's Vibe. I'm happy to have you here for another edition. Over my last two episodes, I talked about the National Association of Mortgage Brokers, legislative priorities, and regulatory initiatives. One of, one item that is common in both of those is the increased cost of credit.

We all have seen credit reports significantly increase. If we just look from 2023 back then FICO decided to introduce a tiered pricing structure where they implemented price increases that range from 10 percent to in some cases 400 percent because it was based on size and volume. So if you were one of the Large entities pulling a large volumes of credit reports, your increase was significantly less than us. Small business owners, mortgage broker, businesses, small mortgage lender businesses whose volume is significantly less. We fell more into that 400 percent price increase. In 2024, FICO decided, hey, maybe this tiered price increase thing isn't really working out.

So they just went to a standard price of $3.50 per credit score for everyone. Moving away from that previous tiered system. 2025 rolls around. They announced a further increase, raising the price to $4.95 per credit score. What is happening? These significant price increases, although the tiered pricing in 2023 saw some people with a 400 percent increase, we're still seeing and experiencing, in some cases, that 400 percent increase.

What happens next? FICO is just 1 small aspect of the situation or of how the pricing is established. Next is the 3 major credit bureaus, Equifax, Experian and TransUnion. They are also going to impose their own fees for accessing and compiling credit data. Fees can vary. Based on different factors, they can they have data access and retrieval fees.

Of course, they're going to charge lenders for retrieving individuals credit data from their databases. They're going to have tri merge report fees because Fannie, Freddie, FHA, VA, USDA, etc. require a tri merge credit report in order to make a credit decision for a borrower. Because of that tri merge report we're pulling from all three credit bureaus.

In 2023, the price for a joint tri merge credit report rose to between $65 and $100 per report. What was it prior to that? Between $30 to $40. Also, we know the credit bureaus have compliance and regulatory costs, and of course, they're also tacking on service and delivery fees. But most of us aren't obtaining our credit reports, our Tri Merge credit reports, directly from the credit bureaus.

We, of course, are going to Tri Merge resellers. And I do want to mention a letter that the National Consumer Reporting Association, who is an association that represents these resellers put out in December of 2024. Just basically addressing any industry misconceptions that the resellers are sharing significant price increases over and above what FICO and the credit bureaus are charging them for obtaining credit data.

As I mentioned. November of 24 FICO announced their increase in royalties, even though they had just increased it in 24 and of course just increased it in 23. So three consecutive years of price increases. Then, of course. The credit bureaus themselves also increase their fees. And so that was all passed on to these resellers.

The reseller market is fairly small, about less than 20 years ago, there were 300 independent companies in this marketplace, today about 30. Because it's that competitive, these resellers really aren't or don't have the opportunity to or. Aren't really trying to add additional fees on top of what they're already charging.

It's such a competitive market. Of course, we know that market share for mortgage loans is smaller within the last 3 years. They're going to really try to keep their prices as competitive as possible according to the N. C. R. A. because their fees have to include the cost of the tri merge report, 

loan origination system, interface technology, and of course customer service. I don't want it to be misconstrued that the resellers who we are dealing directly with are a factor in increasing fees. We're really looking towards FICO and the three credit reporting agencies. So what do we do now?

Let's look at some alternatives. Or some information or maybe even some reasons why we're seeing these significant price increases. So maybe FICO and the three credit reporting agencies are saying it's due to increased compliance and regulatory costs. Of course, there's increased regulatory scrutiny from agencies like the CFPB and the FTC.

Of course, the CFPB just basically got chopped off at the knees. So we probably won't be seeing much regulatory scrutiny from them, at least in the immediate future. There's a lot of mergers and industry consolidation. There's always rising data and technology costs. Of course, there's AI, cybersecurity, cloud computing fraud detection, alternative credit scoring models.

All of those things are passed down as higher fees. Of course, we all know that there's declining loan volume. From 2022 to present we've experienced higher interest rates, smaller market share and home availability. They have to raise their price. According to them, they're raising their prices to maintain revenue.

We also know that Fannie and Freddie as GSEs, or currently as GSEs, do require tri merge credit reports, which are more expensive than single bureau reports. FHFA in 2023, leading into 2024, announced a new credit scoring model that would become available, which is Vantage Score. Vantage Score, for those of you that are not familiar, is actually owned by the three credit reporting agencies.

So Equifax, Experian, and TransUnion all jointly developed VantageScore. They own VantageScore Solutions LLC. They're responsible for managing and maintaining the VantageScore models. So we'll, but we will see what happens under this new Trump administration and with a presumably soon to be confirmed new FHFA director in Bill Pulte, if the Bi-Merge Vantage score model is going to be allowed to be used by Fannie, Freddie, FHA, VA, USDA, et cetera this FHFA announced it as a measure to promote competition.

And potentially reduce costs, but if FICO and the 3 credit reporting agencies are responsible for our increased costs, are we going to really have reduced costs? Are we going to experience reduced costs? Because there's only going to be pulling from 2 credit bureaus instead of 3 credit bureaus are all or all those are those 2 credit bureaus going to be charging the same amount of fees that.

Equal the same dollar amount if we're under the FICO model, who knows? And under this new regime, who knows if the Bi-Merge Vantage Score is even going to survive? Really? We have seen within the last few weeks since President Trump was inaugurated. He's really combing through everything. So we don't really know if Vantage Score and that Bi-Merge  is going to make it on the other side. We may we're still dealing with having the requirement of tri merge. Who knows if we're gonna go to Bi-Merge and who knows if it's gonna be significantly cheaper or widely accepted. We really don't know. So let's look at some potential alternatives.

If you haven't seen the article that recently was published by Mortgage Professional MPA. That was done by myself, as well as  NAMB President Jim Neighbors, we called for some urgent reforms with MPA. Maybe it's time to look at A single Bureau. We have much greater access to information. We have there is no longer just one free credit report every year, a consumer can get as many credit free credit reports as they want in a year.

And also with access to information being so much wider. Is it really necessary to pull from three bureaus? Can maybe a lender make a decision? We're only going to pull from Experian or we're only going to pull from Equifax or we're only going to pull from TransUnion. Maybe it's okay to have a single score and the lender or wholesale lender make a decision based off of a single score.

As long as it's consistent and it's a  level playing field across the board, they're not making a decision. Oh, if it's an FHA loan, we're going to pull from TransUnion. If it's a Fannie Freddie loan, we're going to pull from Equifax. If it's a VA loan, we're going to pull from Experian. What if they're allowed to make a decision that we're going to across the board, pull from one bureau.

And that's how we're going to establish our score. Do we really see a significant swing? Between the three credit reporting agencies, aren't they all supposed to be pulling from the same data? Also, too, wouldn't this help a consumer who has inaccurate data on their credit report? They would only have to go to one bureau to get it corrected.

Instead of having to go to each individual credit bureau to have maybe an errant collection account. Or maybe a trade line that doesn't belong to them. Maybe it belongs to a family member. Maybe they're a junior and a trade line from a senior is showing up on their credit and negatively affecting it.

Wouldn't it be easier to just have to deal with 1? I think as we look at what's going to happen, maybe it's time for FHFA to really look at some additional alternatives instead of using a model That is owned by the three credit reporting agencies. They're just trying to cut out FICO. So I don't know.

Just some thoughts to pause and think about. I, of course, don't have all of the answers, but now is a time for us as trade associations, as individuals who are invested in our industry to make some decisions. To fight for what's right for our consumers, for our businesses, for ourselves, and offer some alternatives to the GSEs, as well as FHFA and HUD and VA.

That maybe the way that we're doing things right now isn't right and maybe now is a time for change. So these are my thoughts. Once again, this is Val's vibe. Thank you for tuning into this edition and look next week for a more detailed discussion on AI. I am leaving tomorrow to go to the NMLS user conference in Atlanta.

AI and how that will affect. the mortgage lending business, loan originators is a big topic of that conference. So I'm going to use next week's episode to discuss some of the takeaways that I have from that conference and just share some thoughts so that we can start to think about how AI is going to affect loan origination and our position as loan originators.

So hope everyone has a great week and I look forward to talking to you again soon.