New Credit Scores Could Open Mortgage Access, Add Risk
VantageScore 4.0 can include rent and utility payments, helping buyers with limited traditional credit histories.
Federal housing officials are moving toward broader use of credit scores in mortgage decisions, a change that could help millions of buyers with limited credit histories. VantageScore 4.0 considers rental and utility payment records, alongside other information, when lenders assess an applicant. The company estimates that 7.7 million Americans could gain mortgage access under the model.
The shift affects loans connected to Fannie Mae and Freddie Mac, as well as the Federal Housing Administration’s pricing approach. FHA Director Bill Pulte has said VantageScore and FICO should use the same pricing structure. The Federal Home Loan Bank of Boston also said its 400 member banks may use VantageScore 4.0 for mortgage collateral, affecting 1.5 million customers.
Analysts caution that the two systems measure credit differently. A Milliman review of 46 million loans found VantageScore was usually 1 to 3 points higher, while lower-scoring borrowers showed higher default rates under that model. The firm said separate approval standards and pricing adjustments are needed. Lenders that have long relied on FICO remain wary that treating the scores alike could increase costs for borrowers and make some home purchases harder to complete.
Why it matters: Mortgage eligibility could expand for buyers with thin credit files, but mismatched scoring standards may raise borrowing costs or complicate approvals.
- Realtor.com News