TIVP041: FAIR ISAAC CORPORATION (FICO): SCORING THE WORLD’S BIGGEST CREDIT SCORER

W/ SHAWN O’MALLEY & DANIEL MAHNCKE

TIVP041: FAIR ISAAC CORPORATION (FICO): SCORING THE WORLD’S BIGGEST CREDIT SCORER W/ SHAWN O’MALLEY & DANIEL MAHNCKE

12 October 2025

Shawn O’Malley and Daniel Mahncke break down Fair Isaac Corporation (ticker: FICO), a company whose algorithms are essential to computing credit scores, which are used in everything in the U.S., from applying for a mortgage, credit cards, apartments, to even job applications and more. FICO has incredible market penetration and earnings leverage, as almost all of its price increases trickle down to the bottom line, even though the cost of credit checks is typically a very small portion of the mortgage origination process, for example.

In this episode, you’ll learn about how FICO came to dominate credit scoring in the U.S., how credit scores have made it possible for millions of people to access financing, why FICO’s industry-leading position is so rock-solid, whether FICO can still be a “compunder” going forward,  and whether FICO’s stock is attractively priced, plus so much more!

SUBSCRIBE

IN THIS EPISODE, YOU’LL LEARN:

  • How credit scores helped to democratize access to credit
  • Why FICO has become the industry standard for credit scores
  • About FICO’s relationship with the three major credit bureaus — Experian, Equifax, and TransUnion
  • How the government helped solidify FICO’s moat, and whether that’s changing
  • What makes FICO one of the most profitable businesses we’ve ever looked at
  • What actually goes into a FICO score
  • How to think about modeling FICO’s intrinsic value
  • Whether Shawn and Daniel add FICO to their Intrinsic Value Portfolio
  • And much, much more!

TRANSCRIPT

Disclaimer: The transcript that follows has been generated using artificial intelligence. We strive to be as accurate as possible, but minor errors and slightly off timestamps may be present due to platform differences.

[00:00:00] Shawn O’Malley: FICO sells 10 billion scores every year, four times the number of McDonald’s burgers, and twice the number of Starbucks coffees sold annually according to the company itself. Nine out of 10 lending decisions rely on FICO.

[00:00:15] Daniel Mahncke: It’s the company that’s. As important as any regulated monopoly, yet its pricing power isn’t actually regulated. They can, and they have raised pricing dramatically in the last few years, which is partially how the operating margins have been able to more than triple since 2019.

[00:00:36] Intro: You’re listening to the Intrinsic Value Podcast by the Investors Podcast Network since 2014, with over 180 million downloads, we’ve learned directly from the world’s best investors. Now we are applying those lessons to analyze businesses and investment opportunities every week, helping you uncover intrinsic value. And now here are your hosts, Shawn O’Malley and Daniel Mahncke.

[00:01:09] Daniel Mahncke: When Americans talk about their FICO score, they’re referencing a specific product from a specific company, and yet the term has really become synonymous with credit worthiness itself. Like other dominant businesses whose names have become synonymous with the services they offer from Ubering to Googling, have you even heard ChatGPT-ing by now? FICO’s linguistic and Cultural Relevance reflects a business with as deeper mode as any out there in Fair Isaac Corporation whose ticker symbol is fittingly FICO. And if you’re not familiar with FICO, the company’s credit scores are used by about 90% of the top lender is in the U.S. making the company’s algorithm the de facto gatekeeper for American Consumer Finance. So Shawn, what do you say? How’s that as a setup for today’s pitch?

[00:01:53] Shawn O’Malley: It’s a great teaser and like you said, just about everyone in the U.S. will be familiar with the company. And then yeah, for the rest of our audience, there’s maybe a decent chance they’ve never heard of FICO, but still, I mean, it’s so impressive to think about how long they’ve dominated.

[00:02:07] Shawn O’Malley: This niche. And you know, I look around and, you know, Google has been around for what, 20 years and even less for Uber and Facebook and still these are companies with massive market share that are synonymous with the services they provide. Like going to say you’re Googling something even if you don’t even actually use Google.

[00:02:22] Shawn O’Malley: But that’s a relatively new phenomenon. And meanwhile, FICO has monetized its algorithmic moat for decades. You know, turning what began as a small consulting firm in the 1950s in California into a financial technology powerhouse. So like we’ve said is really synonymous with personal credit in the U.S. and its shares have just done ridiculously well gaining on average 30% a year since the crash of 2008.

HELP US OUT!

Help us reach new listeners by leaving us a rating and review on Spotify! It takes less than 30 seconds and really helps our show grow, which allows us to bring on even better guests for you all! Thank you – we really appreciate it!

BOOKS AND RESOURCES

NEW TO THE SHOW?

SPONSORS

Support our free podcast by supporting our sponsors:

CONNECT WITH SHAWN

CONNECT WITH DANIEL

PROMOTIONS

Check out our latest offer for all The Investor’s Podcast Network listeners!

WSB + BFF + RWH Promotions

The Intrinsic Value Newsletter