艾可菲

On the morning of Oct. 8, 2026, TransUnion announced a first-look functionality for mortgage lending, and later that evening Equifax followed with a similar “Mortgage Score Select” offering.

Why it matters: Both TransUnion and Equifax essentially let a lender purchase the credit file with one score, review that score, and then decide whether to add a second score without repurchasing the credit file. In Equifax’s case, the second pull would be $1 more. We remind readers that on the July 2026 earnings call, Equifax’s CEO said the firm wasn't seeing a waterfall approach to scores because lenders would have to buy the credit file twice. These announcements remove that friction and make a waterfall approach possible, in which a lender buys one score first and then, based on that result, chooses whether to pull the second score. In many cases, it will still make sense for a lender to pull both scores and get the most favorable LLPA treatment for a conforming mortgage. The exception we see is largely in the top bucket, which currently covers credit scores above 780. Today’s update makes the waterfall approach more practical for a lender. TransUnion’s press release says the offering “allows lenders to start with credit report insights,” and we wonder whether these insights include an ability to estimate what a Fico score might look like.

The bottom line: We expect to reduce our fair value estimate for wide-moat Fair Isaac by a mid-single-digit percentage to account for potential volume headwinds from a waterfall approach. We maintain our recently reduced fair value estimates on narrow-moat Equifax and TransUnion. We also note that Experian has not indicated a similar offering as of now.

Big Picture: We reiterate our High Uncertainty Ratings for TransUnion, Equifax, and Fair Isaac. FHFA Director Pulte’s actions are hard to predict, and although he cannot directly regulate pricing on scores or credit files, they can have major consequences.

From where we sit as external observers, we find it hard to ascertain the GSEs’ appetite for lower economics in allowing score shopping with raising grids to continue. We note that in a Sept. 29 Substack post, former Freddie Mac CEO Don Layton was highly critical of Pulte’s implementation of VantageScore. He went so far as to state that a future FHFA director would need to change much of Pulte’s work to keep the benefits of having more than one score while minimizing the negatives. That said, and with the caveat that there has been leadership turnover at the GSEs, we find it somewhat curious that we have yet to see media reports suggesting internal reservations at Fannie Mae or Freddie Mac about the revised LLPA grid.

Of course, Fair Isaac may try different approaches to limit waterfalling, such as tier-based pricing or subscriptions, but these may result in Fair Isaac ceding economics. We continue to view adoption of the direct license program or DLP as Fair Isaac’s best shot at increasing its mortgage revenues through pricing. If Fair Isaac pursues that proposal, a tricky consideration will be whether to charge lenders or consumers on originated loans for which a FICO score was pulled but that ultimately closed using a VantageScore because of score shopping.

Also of note, Equifax has committed to $1 per score for VantageScore in 2028, which largely matches TransUnion’s actions.

We reduce our fair value estimate for Equifax to $190 from $205 as we lower our mortgage credit revenue estimates, as we take into account a wider range of outcomes from a proposed change to a bi-merge standard. In addition, as mortgage rates have risen since our last update, we take a more cautious view on near-term mortgage volumes. Our discounted cash flow-based analysis indicates a 2027 price/adjusted earnings ratio of approximately 20 times.

We project revenue to increase at approximately a 9% compound annual growth rate over the next five years. Our projections do not include any uncompleted acquisitions. We expect adjusted EBITDA margins to grow over the forecast period as investment spending begins to level off and highly incremental Workforce Solutions revenue flows to the bottom line. Specifically, we model 2030 margins of 33.7%, up from 31.1% in 2026 and 31.9% in 2025.

By segment, we continue to see Workforce Solutions as the fastest-growing, as its income and employment verification dataset is differentiated and has opportunities for expansion into use cases such as government services and nonmortgage consumer lending. In addition, the firm continues to expand its records, improving its revenue realization from queries at existing clients. As such, we model Workforce Solutions revenue growth in the low double digits over our five-year forecast period. We generally model the credit bureau business to grow in the mid- to high-single-digit percentage range. In the US, this is driven by assumptions of modest volume recovery in mortgages, low-single-digit growth in nonmortgage volumes, and pricing. Outside the US, this is driven by pricing, expanding gross domestic product, and use cases in emerging markets. We peg Equifax’s cost of capital at 8.0%, based on an 8.9% cost of equity.

We view Equifax as a narrow-moat business with an intangible moat driven by its proprietary data. While we see Equifax’s data as highly proprietary, we do not see the firm’s return profile as high enough to warrant a wide economic moat rating.

Equifax’s largest segment is Workforce Solutions, which stems from its 2007 acquisition of TALX for $1.4 billion. The primary business of EWS is income and employment verification for lenders (such as mortgage lenders), governments (for determining benefits and other use cases), and corporate HR departments (for verifying new talent). Equifax sources its payroll records through direct relationships with large employers and through payroll partnerships, many of which are exclusive.

While payroll records gathered directly are not contractually exclusive, in practice we believe they are. First, payroll data is sensitive, and employers would prefer not to send it to multiple parties. Second, the income and employment verification services are free, from the employer's perspective, as Equifax bills the lender or verifier for the service, so there's little upside for an employer to share data with another provider.

Given the need to persuade businesses to share sensitive employee income data, we believe this business benefits from a first-mover advantage that allowed it to amass a sizable number of records. We note that margins have meaningfully expanded in recent years as its database has grown. From a payroll provider's perspective (such as Intuit, Paychex, and so on), which receives a revenue share, we believe it is logical for them to sign an exclusive agreement to secure a larger share of revenue.

Given Equifax’s access to exclusive data, the business has shown meaningful pricing power in recent years. We point to the following examples. Experian has built up a competing service, but due to exclusive contracts, it has only a fraction of the records that Equifax has. In addition, Equifax competes with self-reported or consumer-permissioned payroll data (for example, through a myADP login or something similar), but these solutions create friction for consumers.

Equifax’s credit bureau operations provide lenders and other institutions with data, including credit history, current credit status, payment history, address, and other identity information. Equifax’s data is critical to customers' underwriting decisions and other workflows, such as identity verification and fraud detection. The price of its services is small relative to the lending volume. For example, there is approximately $1.3 trillion in revolving debt (that is, credit card debt) outstanding currently, and we estimate that US card-related revenue from all three bureaus is less than $1 billion, which equates to a single-digit basis point. Because the accuracy and completeness of data is critical to credit decision-making, lenders often pull from more than one credit bureau (particularly in scenarios where they have incomplete information), and we do not believe pricing is the primary factor for choosing a credit bureau.

We believe the barriers to entering the credit bureau business are high, as replicating a database of millions of customers would be difficult. Because credit bureaus’ data is based on the voluntary reporting of thousands of financial institutions, it’s unlikely that a startup, particularly given heightened data security concerns, could convince banks to share consumer information.

Mortgage-related revenue makes up 28% of USIS revenue. Government agencies such as Fannie Mae and Freddie Mac require a credit report from all three bureaus, which is known as a “tri-merge” report. Currently, the majority of mortgages originated in the US are conforming, so using Equifax (along with TransUnion and Experian) is essentially required. Media reports indicate that the Federal Housing Finance Agency will move to a "bi-merge." A bi-merge would require only two reports. While a bi-merge gives lenders more bargaining power, the bureau data files are differentiated enough that in many cases, such as for subprime and near-prime customers, it will still make sense to pull all three files.

The 24% of firmwide revenue that Equifax generates outside the United States tends to be slightly lower margin than its US operations. We attribute this to the relatively fixed-cost nature of Equifax’s operations and lower scale in smaller markets compared with the US. While the competitive position of the company’s international operations varies somewhat with its relative size, international markets tend to mirror the oligopolistic structure seen in the US, with only a few viable competitors in each country.

We also see little risk of AI disruption. Equifax's core datasets are proprietary, and we believe that 90% of its revenue that's being generated from proprietary data has merit. Furthermore, there is some evidence that Equifax’s most sophisticated clients, in terms of AI usage, are using Equifax data more, not less.

From a quantitative perspective, Equifax’s returns on invested capital over the last five years (2021-25) were 7.9%, including goodwill, and 21.3% excluding goodwill, by our calculations. These ROICs were not strong enough, in our view, to warrant a wide rating. We peg Equifax’s weighted average cost of capital at 8.1%.

The Workforce Solutions segment is a fast-growing business built on unique data and can contribute meaningfully to earnings growth. Equifax can increase use cases in nonmortgage applications for income verification.

A mortgage market recovery could bring the firm meaningful high-margin incremental revenue.

VantageScore traction in mortgage and nonmortgage markets may offer upside.

Mortgage volume drives Equifax's core credit bureau business and its Workforce Solutions segment, but it is difficult to predict, given its sensitivity to mortgage rates and homebuying activity. In addition, higher rates will weigh on the purchasing and refinancing mortgage market.

While Equifax is the leader in income verification, its success could attract new entrants.

Equifax faces operational risk related to data security. Another breach could materially affect the firm's ability to win new business or new partnerships.