Fannie Mae and Freddie Mac to accept VantageScore 4.0 Credit Scores

VantageScore 4.0 is a tri-bureau credit scoring model that uses data from the three major credit bureaus — Equifax, Experian, and TransUnion — and combines them into a single report. This model is designed to provide a more comprehensive view of a consumer’s credit history, taking into account not just credit card and loan payments, but also rent payments when available. •

Tri-merge model: combines data from all three credit bureaus into a single report
Machine learning: uses machine learning to analyze consumer credit histories
Includes rent payments when available

VantageScore claims to be the first credit scoring model to incorporate rent payment data into its scoring calculations. This innovation is expected to have a significant impact on the mortgage market, as it will allow lenders to consider rent payments as part of a consumer’s credit history.

Benefits of VantageScore 4.0

The incorporation of VantageScore 4.0 into the consumer credit check process provides several benefits, including:

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More accurate credit scores: VantageScore 4.0 uses a more comprehensive view of a consumer’s credit history, reducing the risk of inaccurate credit scores
Increased credit access: VantageScore 4.0 can provide creditworthy consumers who have been overlooked by traditional lenders with access to credit
Reduced closing costs: By considering rent payments as part of a consumer’s credit history, lenders can reduce closing costs associated with mortgage applications

Industry Response

The announcement has been met with positive responses from industry stakeholders, including the Community Home Lenders of America (CHLA) and TransUnion. •

“Director Pulte’s comments demonstrate a commitment to responsible mortgage lending and preserving the best possible outcome for consumers,” said Satyan Merchant, senior vice president of auto and mortgage at TransUnion.

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CHLA praises the announcement as a “win-win” for consumers and lenders
CHLA advocates for a flexible approach to credit scoring, allowing lenders to choose between VantageScore and FICO

FHFA Mandates Change

In October 2022, the FHFA mandated that Fannie and Freddie accept mortgages scored by VantageScore. However, this directive came with a three-year grace period to implement the change. The FHFA’s decision to accept VantageScore 4.0 marks a significant shift in the mortgage market, providing an alternative to the traditional FICO score from Fair Isaac Corp.

Revolutionizing the Mortgage Market

VantageScore Solutions’ president and CEO, Silvio Tavares, stated that the FHFA’s decision will “revolutionize the American mortgage market and grant millions of creditworthy Americans the golden opportunity to own their homes.”

The incorporation of VantageScore 4.0 into the consumer credit check process provides a more nuanced view of a consumer’s credit history, taking into account not just credit card and loan payments, but also rent payments when available.

Key Takeaways

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Key Takeaways	VantageScore 4.0
Tri-merge model: combines data from all three credit bureaus into a single report	VantageScore 4.0 uses a tri-bureau credit scoring model that combines data from Equifax, Experian, and TransUnion into a single report.
Machine learning: uses machine learning to analyze consumer credit histories	VantageScore 4.0 uses machine learning to analyze consumer credit histories, providing a more comprehensive view of a consumer’s credit history.
Includes rent payments when available	VantageScore 4.0 includes rent payments when available, providing a more nuanced view of a consumer’s credit history.

This decision is expected to have a significant impact on the mortgage market, providing more credit access to millions of Americans who have been overlooked by traditional lenders. By incorporating VantageScore 4.0 into the consumer credit check process, lenders can provide more accurate credit scores and reduce closing costs associated with mortgage applications.