Why Fair Isaac Stock Dived by 8% Today

Significant changes might be coming for the rules governing credit scoring, a possibility that was putting the hurt on Fair Isaac (NYSE: FICO) stock on Tuesday. Shares of the credit analysis specialist took a more than 8% hit on the day as a result, a far steeper decline than the S&P 500's (SNPINDEX: ^GSPC) 0.4% dip.

Unfair changes?

At a Mortgage Bankers Association conference, director of the government's Federal Housing Finance Agency (FHFA) Bill Pulte made remarks about changing the requirement for a mortgage underwriter to determine a borrower's interest rate.

Image source: Getty Images.

Currently, this is done by the so-called "tri-merge" method, in which the analyses produced by all the big three credit bureaus using data like Fair Isaac's -- Experian, TransUnion, and Equifax -- are required for this determination. A "bi-merge" system would mandate only two of the trio. If such a change were made, it would very likely affect Fair Isaac's volume.

Another factor in the stock's decline was Pulte's remarks about the future of government-sponsored enterprises (GSE) that support the mortgage market, Fannie Mae and Freddie Mac. In line with the Trump administration's aim of cutting federal government expenditures and putting some functions into the hands of private companies, Pulte described the two GSEs as "bloated," suggesting deep cuts at each, or even some form of privatization.

Wariness warranted

Were Fannie or Freddie to be privatized to an extent, it's possible that they would source credit scores from businesses other than Fair Isaac, ramping up competition against the company.

The current administration seems determined to reshape the mortgage landscape somewhat, in ways that might not be beneficial to Fair Isaac. I'd stay away from the stock until it becomes clearer what changes might be in store.

Should you invest $1,000 in Fair Isaac right now?

Before you buy stock in Fair Isaac, consider this:

The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and Fair Isaac wasn’t one of them. The 10 stocks that made the cut could produce monster returns in the coming years.

Consider when Netflix made this list on December 17, 2004... if you invested $1,000 at the time of our recommendation, you’d have $642,582!* Or when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you’d have $829,879!*

Now, it’s worth noting Stock Advisor’s total average return is 975% — a market-crushing outperformance compared to 172% for the S&P 500. Don’t miss out on the latest top 10 list, available when you join Stock Advisor.

See the 10 stocks »

*Stock Advisor returns as of May 19, 2025

Eric Volkman has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Equifax. The Motley Fool recommends Experian Plc and Fair Isaac. The Motley Fool has a disclosure policy.