Fair Isaac

FICO’s moat is built on multiple reinforcements: 1) Intangible standard and brand credibility with lenders, investors, ratings agencies, and the GSE ecosystem; 2) Very high switching costs as score changes impact underwriting models, capital charges, investor acceptance, and securitization disclosures; 3) Efficient scale in a market that supports very few scoring standards; and 4) Embedded integration across origination, servicing, and secondary markets.

Risks to durability include regulatory initiatives that broaden model choice and potential bi-merge reporting, plus competitive pricing responses from the bureaus around VantageScore.

Near term, FHFA and the GSEs have allowed lenders to deliver with Classic FICO or VantageScore 4.0 while timelines evolve, which slows disruption but maintains policy overhang. The Scores segment’s structural profitability (88 percent segment margin in FY24) evidences entrenched economics supporting the moat.