Fannie Mae and Freddie Mac announced a significant change to their mortgage qualification process by allowing the use of VantageScore 4.0, a newer credit scoring model that incorporates data such as rent and utility payment history, in addition to traditional credit information. This initiative is part of a broader credit score modernization effort led by the Federal Housing Finance Agency (FHFA) and is expected to benefit 'tens of millions' of Americans, according to FHFA Director William Pulte [1].
The rollout will begin on a limited basis with a group of approved lenders, who will have the option to use either VantageScore 4.0 or traditional FICO scores during this phase. Freddie Mac has already started testing the new model, having taken delivery of about $10 million in loans evaluated using VantageScore, which are expected to be securitized [1].
A second updated model, FICO Score 10T, is also set to be introduced as part of the modernization initiative. Like VantageScore 4.0, FICO 10T factors in both positive and negative rental payment history when reported to credit bureaus. Jake Williamson, executive vice president and head of single-family at Fannie Mae, stated that incorporating newer models with more predictive power will support sustainable access to homeownership while maintaining safety and soundness [1].
Efforts to modernize credit scoring have been ongoing for years, with federal regulators approving both VantageScore 4.0 and FICO 10T in 2022 after extensive testing, according to Freddie Mac. Pulte emphasized that this change marks a shift in credit history evaluation, expanding beyond just credit cards and loans to include a broader range of financial behaviors [1].
CONCLUSION
The adoption of VantageScore 4.0 and the planned introduction of FICO Score 10T by Fannie Mae and Freddie Mac represent a major shift in mortgage qualification standards. By factoring in rent and utility payments, the changes are expected to expand access to homeownership for millions of Americans and modernize the credit evaluation process.