The Federal Housing Finance Agency (FHFA) will now allow lenders, including Fannie Mae and Freddie Mac, to use VantageScore in addition to the long-standing FICO credit score model for mortgage approvals. The policy, announced recently by FHFA Director William Pulte on the social platform X, is seen as a step toward reducing FICO’s dominance and widening access to mortgage credit for more buyers.
The move is expected to benefit younger borrowers and new credit customers who have thin or limited credit histories, which can make generating a traditional FICO score difficult.
What is VantageScore?
VantageScore was developed in 2006 by credit reporting agencies Equifax, Experian, and TransUnion as an alternative scoring model. Unlike FICO, it incorporates newer forms of data such as rental payments, utility bills, and cellphone payment histories, in addition to conventional loan records. According to VantageScore, this expanded approach could help as many as 5 million potential homebuyers become eligible for mortgage loans.
Concerns and Implementation
The FHFA has not yet set a firm date for full implementation of the new scoring option. Some industry observers have warned that allowing multiple credit models could create opportunities for lenders to select whichever score benefits applicants most, potentially inflating approval rates.
To address this, the FHFA stated that it will not permit lenders to use both scores for a single loan application, preventing dual scoring to maximize approvals.
Skepticism from Consumer Advocates
Not all experts believe the change will significantly impact mortgage access. Sharon Cornelissen, director at the Consumer Federation of America (CFA), said, “It’s rare for someone who couldn’t get a FICO score to suddenly qualify for a mortgage solely because of VantageScore.”
BY HOONSIK WOO [woo.hoonsik@koreadaily.com]
