Morgan Stanley says Equifax, TransUnion selloffs on FICO score change ‘overdone’

Morgan Stanley notes that Equifax (EFX) and TransUnion (TRU) shares declined yesterday after Fair Isaac (FICO) announced an alternative delivery method of providing its credit scores to the mortgage industry through the FICO Mortgage Direct License Program with the aim of allowing tri-merge resellers to calculate the FICO score without having to go to the credit bureaus. However, the firm views the underlying proprietary data – not the score – as the integral component for credit underwriting, and points out that this data is owned by the bureaus. Despite uncertainty in the credit score ecosystem, the firm believes that the bureaus are still providing the most value via owning the proprietary data and while the news “may have taken the bureaus by surprise,” the firm believes they will formulate a response. Morgan Stanley maintains Overweight ratings on Equifax and TransUnion.