The Credit Score Cartel

Welcome to my weekly article, right here on BP! 

This week, we’re talkin’ the hot jobs number triple, the shrinking federal workforce, and the end of FICO's 31-year monopoly on the mortgage credit score.

Let’s get into it.

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Today’s Interest Rate: 6.89%

(☝️ .08% from this time last week, 30-yr mortgage)

Rates crept higher after Friday’s blowout jobs report, yet the bond market is still toying with the idea of a rate hike at the September 15–16 Fed meeting. I still think they hold. A crude spike (oil was up about 9% on the week) is the one and only variable, which we will watch. More on that below.

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The Weekly 3 in News:

1. --Hiring reaccelerated. The US added 162,000 jobs in August, triple the ~53,000 economists expected, and June and July were revised UP by a combined 55,000. Unemployment held at 4.1%; wages rose 3.1% from a year ago. That’s an official 3 month NBA Jam trend. (BLS, Sept 4; CNBC)
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3. --Manufacturing Up too. The ISM Manufacturing index came in at 54.6 in August, its 8th straight month above 50, and ISM Services hit 55.4, its 26th straight. The Atlanta Fed’s GDPNow tracker has Q3 growth at 4.7%. (ISM Manufacturing, Sept 2; ISM Services, Sept 3; Atlanta Fed)
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5. --Bad news: Mortgage rates edged back up, on oil prices. The average 30-year fixed rose to 6.89%, up 8 basis points on the week, as oil prices continued to pushed Treasury yields higher. (Mortgage News Daily, Sept 4; Freddie Mac) The August CPI inflation reading lands Friday, September 11. That could be the number that decides whether the Fed holds or not.

Fun Things Happening in Nashville This Week:

• --The Nashville Fair opens Friday. Ten days at The Fairgrounds Nashville, Sept 11–20: midway rides, nightly pro wrestling on the Midway, racing pigs, a Monster Truck Bash at the Speedway, live music on three stages, and a Prince’s Hot Chicken eating contest on Saturdays at 5:30. Weekday gates open at 5pm, weekends at noon. Adults $10 at the gate, $8 online; kids 5 and under free. New this year: an official mascot, Barnyard Benny, a blue-eyed Nigerian Dwarf goat. (Nashville Fair)
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• --Titans home opener, Sunday at noon. Tennessee vs. the New York Jets, Sept 13, 12:00 CT at Nissan Stadium on CBS. New head coach Robert Saleh opens the season against the team he coached for four years. Eagles come to town the following Sunday. (Titans)

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This Week’s Numbers

A quick look at the key economic numbers.

--------The US Jobs Machine

We may be witnessing a blue collar industrial/manufacturing revival.

Payrolls rose by 162,000, nearly three times the ~53,000 forecast, and the two prior months were revised up by a combined 55,000. July, which was first reported as a loss of 23,000 jobs, now shows a gain of 21,000. Unemployment held at 4.1%. Average hourly earnings grew 3.1% from a year ago. Construction added 22,000. (BLS)

One month is noise. But this is the third month in a row of positive payrolls after the spring wobble, and by my own NBA Jam rule, three months means something.

Source: BLS Employment Situation (Sept 4, 2026) via FRED PAYEMS; monthly changes computed from the revised level series.

And it doesn’t stop there.

Job openings held at 7.3 million in July, and layoffs came in at 1.67 million, right at the bottom of the range we saw in 2019, before anyone had heard of a lockdown. (BLS JOLTS) Layoffs are the number I watch for rent collections. There is no need for home price or rent reductions when folks have a job.

Source: BLS JOLTS (released Sept 3, 2026) via FRED JTSJOL and JTSLDL.

Federal Employment

Buried in the same release: federal government employment came in at 2,674,000 in August. That’s down 5,000 on the month and -339,000 from the October 2024 peak of 3,013,000, an 11.3% decline. (BLS via FRED, series CES9091000001)

I pulled the full series back to 1939 and, the last time the federal payroll was this small was ….. June of 1966.

Sixty years.

Lyndon Johnson was in the White House and the Beatles were still touring.

Source: BLS via FRED, CES9091000001 and PAYEMS, seasonally adjusted, through Aug 2026. Share is calculated.

Remember, government work is nonproductive, the salary costs the taxpayer without adding to economic growth.

That is not a jab. It’s just the case.

The math: The BEA values government output at the cost of its inputs, mostly employee compensation, because a DMV clerk’s work has no market price. So if you hire another federal worker, measured output rises by exactly what you pay them. Input equals output, which means measured productivity growth is, by construction, zero. BLS knows it’s circular, and that is why the agency explicitly excludes government from its business-sector productivity statistics. (BLS Handbook of Methods, Productivity Concepts; BEA)

Now move 339,000 people out of a column defined as zero productivity growth and into a private economy that just posted ISM readings of 54.6 and 55.4 and a 4.7% GDP expectation. If most of them get employed privately, and the 4.1% unemployment rate says they appear to be landing, that is a massive productivity tailwind. Productivity is the one thing that lets an economy grow without inflating. And disinflation without recession is the setup that gets a 30-year mortgage back toward a five-handle, which is the whole case I made in June.

One note: Nonproductive Is Not Worthless

Government works output does not grow economic value BUT this is not to say it has no value.

Air traffic controllers, FAA certifiers, NIH researchers, patent examiners, federal judges, IRS collections agents: we need these workers to keep the economy rolling. Cut the wrong ones and private output falls, with a lag, and that lag won’t show up in a jobs report for a year or two. And the cuts were broad: GAO counts nearly 378,000 separations from 22 major agencies in 2025 against about 127,000 hires, with 18 of the 22 agencies shrinking more than 10% and the Department of Education by more than 45%. (GAO, June 2026) Cut that broadly, that fast, and it could affect overall productivity of the US workforce.

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FICO Just Lost a 31-Year Monopoly

Thursday evening, the director of the agency that oversees Fannie Mae and Freddie Mac posted this on X:

“Fannie and Freddie’s initial rollout of VantageScore has been incredibly successful, with 50 LENDERS DELIVERING LOANS. So, EFFECTIVE IMMEDIATELY, I’m instructing Fannie and Freddie to approve ALL lenders to use VantageScore.” (Bill Pulte on X, Sept 3, via HousingWire)

Friday morning, Fair Isaac, the company behind the FICO score, opened down 16% and closed at $932.26, off 16.7%on the day, on about seven times the prior day’s volume. (StockAnalysis / S&P Global)

For roughly thirty-one years, since 1995, Classic FICO was the only credit score Fannie and Freddie would accept on a conforming mortgage. (FICO’s own history) That’s not a competitive position. That’s a toll booth on the only road into town. And this week the toll booth came down.

Sources: FICO; Pub. L. 115-174; FHFA (Oct 24, 2022 and Apr 22, 2026); Scotsman Guide; HousingWire; Pulte on X (Sept 3, 2026).

The Price of Your Score

Here’s why this happened, and it’s a pricing story more than a credit-modeling story.

A tri-merge (that’s the industry term for pulling all three credit bureaus, Equifax, Experian and TransUnion, on one applicant) requires three FICO scores. Per the Community Home Lenders of America, the wholesale FICO royalty for that tri-merge went from $1.80 in late 2022 to $30 in 2026. That’s $0.60 a score to $10 a score. Up 1,567% in four years. (CHLA analysis; HousingWire)

The steps, from FICO’s own disclosures: $0.60 per score through 2022, tiered pricing in 2023, a flat $3.50 in 2024, $4.95 in 2025, and $10 in 2026 under a new “Direct License Program” that cuts the bureaus out of distribution. (HousingWire, Nov 2024; FICO, Oct 1 2025)

Source: CHLA analysis (April 2026) via HousingWire; FICO royalty history via HousingWire and FICO’s Oct 1, 2025 release.

Now, in FICO’s defense, the company says $10 wasn’t a new increase, it was already the average price the bureaus were charging resellers in 2025 after marking up FICO’s $4.95 royalty, and its own royalty is about 0.2% of a $6,000 closing-cost bill. (FICO; HousingWire) Equifax, Senator Hawley and the community lenders call it a doubling. Both framings are in the record. What isn’t in dispute is the direction, or the margin.

And look at that margin.

In the quarter ended June 30, FICO’s mortgage-origination score revenue grew 97% year over year on what the company called “low single digit” growth in volume. (FICO Q3 FY2026 call) Almost all of that was price. Mortgage scores were 62% of the Scores segment’s $459 million that quarter, which pencils to roughly $285 million, about 42% of the whole company’s revenue. Senator Hawley’s letter cites an 88% operating margin in the Scores business. (Hawley, March 23)

That gravy train may be coming to an end, the stock tanked.

Source: FICO Q3 FY2026 earnings call (July 29, 2026). Dollar split is calculated from disclosed percentages.

The Second Act: The Bureaus

Pulte didn’t stop at FICO. In the same thread he turned on the three credit bureaus:

“Equifax, Experian, and TransUnion have been overcharging Americans for far too long. This will end soon. We are seriously considering bi-merge, and stronger solutions.” (HousingWire)

He called their behavior “cartel-like.” On Friday he added that FHFA is “also studying the usage of just one credit report.”

Bi-merge means pulling two bureaus instead of three. Single-file means one. Each bureau file costs a reseller roughly $13 to $25 wholesale before markup (AEI via National Mortgage News), so dropping one bureau takes roughly a third out of the pull. The Mortgage Bankers Association has already proposed a single-file option for borrowers above 700, which is about 75% of Fannie and Freddie’s volume. (MBA)

Equifax fell 6.4% Friday, TransUnion 5.9%. (StockAnalysis) Which brings us to the delicious part.

VantageScore, the score that just won, is a joint venture owned by Equifax, Experian and TransUnion.(VantageScore) Pulte broke one monopoly by handing market share to a company owned by the three firms he called a cartel the same night. Everybody in this story is somebody’s landlord.

Side note: have you ever tried disputing a credit report item? These folks are useless, I can;t say enough bad things about the credit “bureaus.” Hell, what is a bureau exactly? Who are they, the FBI now?

But I digress…

What VantageScore Does Differently

Same bureau files, different model. VantageScore 4.0 uses 24 months of trended data (is your balance going up or down, not just what it is today), it counts rent, utility and telecom payments when they’re in the file, and it can score someone with as little as one month of credit history versus six for FICO. (FHFA FAQ; HousingWire)

VantageScore’s own numbers, and I’m labeling them as the company’s numbers: about 33 million more adults become scoreable, nearly 5 million of them land above a 620 mortgage threshold, and that is a “$1 trillion lending opportunity.” (VantageScore, July 2026) The company also claims 9%+ of everything Fannie and Freddie securitized since May 1 was scored on VantageScore alone. Rocket and UWM have been running it since spring. (Business Wire; National Mortgage News)

Why This Matters to You

Three reasons, in order of how much money they represent.

1. --The renter-to-buyer pipeline widens. Your good-paying tenant of six years has been building a credit file this whole time, and until now, nobody scoring a mortgage was reading it. Rent history counts now. That’s net-new buyers for your listings, net-new exit liquidity for your flips, and the pipeline every landlord eventually sells into. Two of the five ways real estate builds wealth, leverage and loan paydown, both start with a lender saying yes; I wrote a whole book on those five engines and the qualifying step is where the first two live or die.
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3. --Rent reporting just became a real amenity. Landlords aren’t required to report rent to the bureaus, and most don’t. The tenants who benefit are the ones whose rent is in the file: through Experian RentBureau, through Fannie Mae’s Positive Rent Payment program for multifamily owners, or through tenant-paid services. (Experian; Fannie Mae) Offering to report rent is a leasing perk that costs almost nothing and now feeds directly into an approved mortgage score. It’s also a retention tool, because the tenant who’s building credit with you has a reason to keep paying on the first.
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5. --Your tenant screening will change. VantageScore runs higher than Classic FICO for the same person. The mortgage insurers’ new capital grids treat a VantageScore loan like a FICO loan about 20 points lower, and UWM applies its own 20-point haircut before underwriting. (HousingWire; UWM) A 660 on an application no longer means what a 660 meant last year. Ask your screening vendor which model they run.

One thing this doesn’t touch: the DSCR investor loans most of us use. Those aren’t sold to Fannie and Freddie, so the order doesn’t reach them, and the lenders I checked still quote FICO minimums. FHA will accept VantageScore for case numbers starting January 1, 2027. (HousingWire)

The Questions You Should Be Asking

Will my FICO score change? No. Your Classic FICO is unchanged. VantageScore is a second, parallel score built from the same bureau files, and Classic FICO stays an approved model. (FHFA FAQ)

Do I need to do anything? No. The lender picks the model, loan by loan. Fannie and Freddie won’t accept two models on one loan, and all borrowers on the loan have to be scored the same way. You can ask your lender which one they’re using, and you can ask them to run the other. Rocket and UWM brokers already do this on every file.

Is a 700 VantageScore the same as a 700 FICO? No. Same 300–850 scale, different distributions. The market convention is to subtract 20 points. At the individual level the spread is wide: AEI says a 720 FICO can land anywhere from 660 to 800 on VantageScore. (AEI)

Will my closing costs go down? On the score fee itself, barely. VantageScore is about half the price of a FICO at the bureaus, and TransUnion is bundling it free with a FICO through year-end, so on a two-borrower tri-merge you’re talking tens of dollars. The real money is in the pricing grid: a borrower who moves up one credit band on a $300,000 loan saves roughly $900 in loan-level price adjustments (the risk-based fees Fannie and Freddie charge). (Urban Institute)

Can I ask my lender to use whichever score is higher? Yes, and that’s the whole controversy. See the steelman.

What’s bi-merge and when? Two bureaus instead of three. FHFA announced it in 2022, shelved it in January 2025, and Pulte revived the idea Thursday. No date. The mortgage bankers want single-file for anyone above 700. My read: some version of this arrives within a year, because the politics of “we cut your closing costs” before a midterm are hard to resist.

Does this help my tenants qualify? Only if their rent is in the file. See item 2 above. If you want to understand what moves a score and what doesn't, the clearest plain-English book on it is by Anthony Davenport.

What about my DSCR loans? Unaffected. Non-agency lenders set their own rules.

Is this 2006 again? No, and the reason is structural: nobody is changing the loan. Same down payment, same debt-to-income, same tri-merge for now. What changed is which yardstick reads the file. That said, read the steelman.

What happens to FICO? It fights on 10T, its newer model, which is validated but not yet accepted for delivery and which FICO now bundles free with Classic. FICO’s CEO says VantageScore’s realistic ceiling “is in the 20s” percent. (FICO call) The stock is down about 44% this year. I have no position and no view on the shares.

My Verdict:

This is a real structural win on cost and competition.

We should see a modest positive demand effect, and a live risk of model-shopping until Fannie, Freddie and the insurers finish harmonizing the two scales. The 20-point haircut is the market already doing that work on its own. The monopoly deserved to end, and the price chart is the whole argument.

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Quick Take: Nashville Unemployment Is Still a Full Point Below the Nation

Nashville’s metro unemployment rate was 3.1% in July. The comparable national figure, using the same unadjusted series so it’s apples to apples, was 4.4%. That’s a 1.3-point gap, and Nashville’s rate is down from 3.4% a year earlier. (FRED, Nashville MSA; FRED, US not seasonally adjusted)

Source: BLS via FRED, NASH947URN and UNRATENSA (both not seasonally adjusted), through July 2026.

Speaking of the federal workforce: Nashville isn’t a federal town. Its jobs are health care, music, hospitality, logistics and a growing pile of corporate headquarters. The metro that loses when Washington shrinks is Washington. The metro that wins when the private economy adds 162,000 jobs in a month is the one that was already hiring.

Jobs are renters now and buyers later. And as of this week, a few more of those renters can be scored.

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My Skeptical Take:

Every so often the week’s news lines up and weaves a solid narrative: the economy looks to be reindustrializing.

Hiring tripled. Nonproductive work shrank. And the one company that stood between every conventional borrower and a mortgage lost its monopoly, after raising prices 1,567%.

Good.

And with Labor Day the official beginning to election season, a reminder to be wary of a noisy news, full of salacious headlines.

Washington will likely offer many victims, villains and slogans in the coming weeks.

So on this Labor Day I leave you with this parting thought from Adam Smith, who wrote in 1776:

“People of the same trade seldom meet together, even for merriment and diversion, but the conversation ends in a conspiracy against the public, or in some contrivance to raise prices.”

— Adam Smith, The Wealth of Nations, 1776

Smith’s point was that anyone with a captive customer will, given enough time, raise the price.

The only cure for higher prices, is competition.

Everything else is noise.

Until next time. Stay Curious. Stay Skeptical.

Herzliche Grüße,

-The Skeptical Investor

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