On the desk today · Fair Isaac Corporation
They sell a three-digit number. Nobody has figured out how to stop buying it.
| NYSE · FICO |
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The Toll Booth With
No Exit Ramp
In 1956, two researchers at the Stanford Research Institute pitched an idea to every bank they could reach. Bill Fair was an engineer. Earl Isaac was a mathematician who had served on the USS Missouri in World War II. Their idea was simple — use math, not gut feeling, to decide who gets a loan.
They scraped together $400 each and set up shop in a studio apartment on Lincoln Avenue in San Rafael, California. Every bank said no. For two years, nobody bought what they were selling.
Then American Investments — a small finance company — wrote them a check. That was the first sale. I think about that a lot.
I applied for a mortgage a few years ago. The loan officer pulled my credit — three bureaus, three scores. The whole process took about ninety seconds. I didn't think much about it at the time. But behind that ninety-second check was a company that charged a fee for each of those three scores. Not a big fee. A few dollars. Multiply that by every mortgage, every car loan, every credit card in America — and you start to see the toll booth.
Most people think FICO is a government agency or a formula owned by the credit bureaus. It's neither. Fair Isaac Corporation is a public company — ticker FICO on the New York Stock Exchange — that sells a three-digit number. If you've ever applied for a loan, you've already paid for it. You just didn't know.
Fair and Isaac spent decades building scoring models for banks — custom, one at a time. In 1989, they introduced the general-purpose FICO Score, which became available through all three major credit bureaus by 1991. One score. One standard. Every lender in the country could use the same language to talk about risk. The company went public in 1987 and now sits in Bozeman, Montana — a town of about 60,000 — running a $2 billion business with roughly 3,800 employees.
In fiscal 2025 — which ended last September — Fair Isaac reported $1.99 billion in total revenue. Up 16% from the year before. The Scores segment alone brought in $1.17 billion. That is the revenue from selling a number. The Scores business runs at an operating margin of about 88%. For every dollar of score revenue, the company keeps 88 cents.
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Forget Middle East Oil - Look Near Grand Canyon
For a century, America fought wars over energy buried six thousand miles away.
The largest energy source on Earth was under our own feet the whole time - much of it beneath the desert near the Grand Canyon.
How big?
50,000 times every oil and gas reserve on the planet.
Combined.
The center of the Earth runs as hot as the sun's surface.
Tapping a sliver of it could power civilization for two million years.
The size was never the problem. The reach was - until a drilling crew hit the DOE's 2035 targets twelve years early, and costs fell 50% in 18 months.
Google signed. Gates invested. The Pentagon made it a priority.
One company has quietly built this for sixty years.
That 90% number is the moat in plain sight. Every bank, every credit union, every mortgage lender in America has built its risk models around the FICO Score. Their underwriting systems expect it. Their regulators reference it. Holders of mortgage-backed securities price risk using it. Switching to a different score means rebuilding the entire decision infrastructure. I don't think most people grasp how deep that lock-in goes.
Here is the pricing story — and if you follow only one thread in this letter, make it this one. In 2018, FICO charged about $0.50 per mortgage score at wholesale. In 2023, they moved to a tiered structure — $0.60 to $2.75 per score. In 2024, a flat $3.50. In 2025, $4.95 — a 41% jump. Then in 2026, the company doubled it again to $10 per score. Senator Josh Hawley urged the Department of Justice to investigate the pricing. Critics called it monopoly-like. Lenders kept paying.
CEO Will Lansing has pushed back on the monopoly talk. The company's position: alternatives to FICO exist — lenders just prefer not to use them. That is a hard argument to counter when 90% of top lenders keep coming back.
He is technically right. VantageScore — built by the three credit bureaus — has existed since 2006. In July 2025, federal regulators approved it for use in government-backed mortgages. For the first time in decades, FICO had real competition.
But adoption has been glacial. Lansing himself noted that when FICO moved from version 8 to version 9, it took four years before half the market switched — and that was between two versions of the same product. Imagine switching to a different score entirely.
Scores are not the whole story. The Software segment — $822 million in fiscal 2025 — handles fraud detection and decisioning platforms for the same banks that already use FICO Scores. Once a bank runs on the score, the company layers the analytics platform on top. Platform software retention runs at 112%. And each new score version — FICO 10, FICO 10T — comes with a higher price than the last. The upgrade path is the score itself.
WHY THIS WORKS
The standard is the moat. When every regulator, investor, and risk model references the same score, the cost of switching isn't financial — it's institutional.
The product is weightless. A three-digit number requires no warehouses, no trucks, no raw materials. That is how you get to 88% margins.
Price and volume move independently. FICO can raise the per-score fee without changing the product — because the product is a toll, not a good.
The upgrade cycle resets the clock. Each new FICO version gives the company a reason to reprice — and lenders a reason to recalibrate.
Fair Isaac's headquarters sits in Bozeman, Montana — closer to Yellowstone than to Wall Street. From that town, about 3,800 employees run a scoring system that touches more than 10 billion credit decisions a year. The product weighs nothing. The switching cost is everything.
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