Rethinking borrower credit costs in today’s lending environment

At recent conferences, one theme keeps surfacing in conversations with lenders: borrower credit pricing is becoming increasingly difficult to manage. In hallway discussions, breakout sessions and one-on-one meetings, credit costs were discussed as frequently as rates and volume. Margins have remained tight throughout 2025 and into the first quarter of 2026. Competition is intense and the cost of pulling borrower credit continues to climb. 

Not long ago, wholesale FICO pricing was measured in cents. Today, lenders are paying materially more per score, and on a joint application with a traditional tri-merge pull, those increases compound quickly.

This isn’t a one-time spike. Over the past several years, the cost of borrower credit data has steadily climbed. The most recent pricing adjustments for 2025 and 2026 represent more than incremental change. Wholesale royalty increases, combined with repository markups and associated fees, have created meaningful cost pressure across the origination process. When multiplied across multiple repositories in a tri-merge report, the impact on lender economics becomes impossible to ignore.

The hidden cost: fallout risk

One of the most candid conversations I had at a recent MBA conference wasn’t about the sticker price of a credit report. It was about fallout. 

Many lenders pay for credit pulls upfront and only earn revenue when the loan closes. In a high-fallout environment, like the one we’ve experienced in recent quarters, that math becomes painful. A lender might pull dozens of reports on borrowers who ultimately don’t qualify, don’t proceed or refinance elsewhere. 

Regardless of the reason, if the loan can’t close, the lender absorbs that expense. That’s because many traditional pricing structures are flat and front-loaded. The lender pays the same amount whether the file closes or not. 

From a service provider’s standpoint, that model is predictable. From a lender’s standpoint, it can mean carrying disproportionate risk. That misalignment came up repeatedly in our recent conversations.

At Service 1st, we’ve taken that feedback seriously. In response, we’ve implemented pricing structures designed to reduce upfront costs — in some cases below our own cost — and incorporate a back-end component tied to funded loans.

In practical terms, that means we share the risk. When the lender loses a file, we feel it. When the lender closes a loan, we participate in that success. That alignment changes the conversation. It shifts the relationship from purely transactional to more aligned and collaborative, which many lenders have told us better reflects today’s realities.

The reaction at recent events, including the MBA Independent Mortgage Bankers Conference, has been consistent: lenders appreciate pricing conversations that acknowledge the pressure they’re under and offer flexibility rather than fixed assumptions.

Competition, timing, and strategic workflow

Another recurring topic is the competitive dynamic between FICO and VantageScore. 

VantageScore 4.0, backed by Equifax and TransUnion, is positioning itself as a lower-cost alternative. As government-sponsored enterprises (GSEs), investors, mortgage insurance companies and other participants in the loan origination process continue to evaluate infrastructure readiness and adoption timelines, the introduction of broader score acceptance could eventually reshape pricing dynamics and introduce long-awaited competition into the credit scoring market.

That said, most lenders acknowledge we’re not fully there yet. FICO remains the required model in many mortgage scenarios, and until competition is fully operational across the ecosystem, pricing flexibility will remain limited. In the meantime, lenders can’t afford to wait for broader market forces to resolve cost concerns.

What we’re hearing instead is a growing interest in modified soft inquiry strategies. With proper structuring, lenders can use soft credit pulls earlier in the qualification process and delay hard inquiries until later stages.

Fannie Mae and Freddie Mac have frameworks that allow this when configured correctly. Thoughtful sequencing can reduce wasted spend on files that never convert while also improving the borrower’s shopping experience. Lenders exploring this approach most aggressively aren’t just focused on unit price; they’re rethinking workflow.

At the same time, broader shifts are underway. Alternative data, evolving underwriting standards and adjustments to traditional minimum score thresholds continue to shape the credit landscape. Rental payment history, “buy now, pay later” performance and other nontraditional indicators are entering scoring conversations. 

These developments may expand access to credit, but they also introduce complexity, making transparency around pricing even more important. 

Questions worth asking

Based on conversations we’ve had across conferences and private meetings, lenders should ask:

• Are we absorbing all the fallout risk in our credit pricing model?

• Do our vendor relationships reflect shared accountability for performance?

• Are we sequencing credit pulls strategically to manage cost without compromising compliance?

These are operational questions with direct profitability implications.

Plus, as mergers and acquisitions accelerate, scale will matter even more. Larger institutions may have more leverage in negotiating service contracts, while smaller lenders may need more creative pricing structures to compete.

Credit pricing is more than a line item

Borrower credit pricing is no longer a back-office expense. It has become a meaningful driver of profitability and workflow strategy. Rising royalties, repository responses and evolving underwriting frameworks are reshaping mortgage economics in real time.

The lenders navigating this environment most effectively are those willing to rethink structure rather than simply negotiate price. That might mean exploring alternative workflows, evaluating risk-sharing models or reassessing how credit fits into the broader origination strategy.

At NCS, our approach has been straightforward: listen carefully, adapt where we can and align incentives wherever possible. In a market defined by tight margins and elevated fallout, partnership matters.

As always, we appreciate the conversations and the opportunity to evolve alongside our clients.

Jeff Gentry is chief revenue officer of Service 1st, where he leads national sales strategy and enterprise partnerships across mortgage, consumer and commercial lending. With more than two decades of experience in credit reporting and financial services, Gentry works closely with lenders to develop compliant, cost-effective credit solutions that align with evolving market demands. He is a frequent industry contributor and speaker on borrower credit pricing, risk management and emerging trends in mortgage technology.