Federal Housing Finance Agency Director William Pulte announced July 8 that the government-sponsored enterprises, Fannie Mae and Freddie Mac, will begin accepting VantageScore 4.0 for mortgage underwriting, either alongside or in place of traditional FICO credit scores. This change, effective immediately, provides potential homebuyers with an extra boost that can either qualify them for a mortgage or reduce the cost of the loan.
VantageScore 4.0 is a newer model developed by the three major credit bureaus (Equifax, Experian and TransUnion) that analyzes changes in credit data over time and includes additional data points, such as rental, utility and telecom payments, in the credit report, rewarding borrowers for making timely payments. These data points have traditionally been excluded from credit reports.
The National Association of REALTORS® praises the FHFA decision as a win for real estate professionals and consumers. The modernization of the credit scoring system will help borrowers, especially those with limited credit, to gain access to a competitive housing market. In 2023, NAR sent a letterpdf, along with other industry partners, encouraging the adoption of VantageScore 4.0.
“NAR has long called for modernizing the credit scoring system to better reflect how today’s consumers manage their finances. We applaud the announcement from FHFA Director Bill Pulte that the GSEs will soon begin accepting VantageScore in addition to other credit scoring models,” says NAR Executive Vice President and Chief Advocacy Officer Shannon McGahn.
“This is a major step toward a more accurate and equitable mortgage underwriting process, one that considers timely rent, utility and telecom payments as indicators of creditworthiness,” McGahn says. “These are real-world factors that show how people pay their bills and should count when determining if someone qualifies for a mortgage.”
Expanding the number of acceptable credit scoring models also fosters competition in credit reporting, which will lower costs, increase accuracy and help more qualified Americans achieve homeownership.
NAR will continue to work with the FHFA and Congress to bring further updates to credit scoring, giving more qualified borrowers the opportunity to buy a home.
