VantageScore 4.0 is now being accepted by Fannie Mae and Freddie Mac, and the Federal Housing Administration is also moving to adopt the model.
Federal housing officials said Wednesday they will move forward with a long-awaited overhaul of mortgage credit scoring, allowing the use of VantageScore 4.0 across government-backed loans and opening the door to more competition in how they evaluate borrowers.
The Federal Housing Finance Agency and the Department of Housing and Urban Development have jointly announced that VantageScore 4.0 will be accepted by Fannie Mae and Freddie Mac, and the Federal Housing Administration is also moving to adopt the model, officials said. Agencies are also planning to incorporate FICO Score 10T along with VantageScore 4.0 as part of broader modernization efforts.
“By adopting additional predictive credit scoring models, we are taking a meaningful step toward expanding access to homeownership, especially for creditworthy borrowers who were overlooked by the old system,” HUD Secretary Scott Turner said in the announcement.
The transition marks a significant departure from a long-standing reliance on the traditional FICO model and is intended to modernize underwriting operations while expanding access to credit. FHFA Director William J. Pulte said in a news release that the measure would introduce a “more predictive model” to the mortgage process and help borrowers who consistently pay rent qualify for a mortgage.
This change is based on the Credit Score Competition Act and FHFA’s 2022 decision to authorize the use of both VantageScore 4.0 and FICO 10T in mortgage lending, but it took several years to implement.
In a separate announcement, Fannie Mae said it would update its sales guides to allow lenders to use VantageScore 4.0 immediately, calling the change an important milestone in the company’s credit score modernization efforts.
VantageScore 4.0 provides trending credit data, a more comprehensive analysis of how a borrower’s balances and payments change over time rather than a single snapshot, and can incorporate payment history for things like rent and utilities, which proponents argue can better understand borrower behavior and bring more “credit invisible” consumers into the market.
Regulators and industry groups are positioning the changes as a way to increase competition in a credit scoring market that has long been dominated by a single model. The competition could reduce costs for lenders and expand access to mortgage financing, according to a statement released at the same time.
Credit bureau Experian said it was working with lenders to assist with the transition.
“This moment paves a clear path to demonstrating the real-world performance of VantageScore 4.0 at scale,” said Michele Bodda, president of the company’s residential division, in the announcement.
This policy change is expected to be rolled out gradually as lenders update their systems and underwriting processes, but it signals one of the most significant changes in mortgage credit scoring in decades.
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