Housing and Urban Development Secretary Scott Turner and Federal Housing Finance Agency (FHFA) Director William J. Pulte announced the Federal Housing Administration, Fannie Mae and Freddie Mac are implementing their first new credit score models for mortgages in decades.
This follows Pulte’s announcement last July 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.
The National Association of REALTORS® applauds the FHFA decision as a positive step for both real estate professionals and consumers. By modernizing the credit scoring system, the policy expands access to mortgage financing, particularly for borrowers with limited credit histories, helping more Americans compete in today’s housing market.
“The Federal Housing Finance Agency’s announcement marks an important step forward in modernizing the mortgage marketplace and expanding access to homeownership,” says NAR Executive Vice President and Chief Advocacy Officer Shannon McGahn. “For years, the National Association of REALTORS® has advocated for a more competitive and accurate credit scoring system, one that better reflects how consumers manage their financial lives today.”
The VantageScore 4.0 model was developed by the three major credit bureaus (Equifax, Experian and TransUnion) to analyze changes in credit data over time and include 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.
“Introducing competition into the credit scoring process has the potential to lower costs, improve efficiency and open the door to qualified borrowers who may have been overlooked under older models. By allowing the use of multiple credit scoring approaches, including those that incorporate rent, utility and other payment histories, this policy can help create a more complete and fair assessment of creditworthiness,” McGahn says.
Expanding the number of acceptable credit scoring models fosters greater competition in credit reporting, she says, helping to lower costs, improve accuracy and open the door to homeownership for more qualified Americans, bringing the promise of the American dream within closer reach.
NAR will continue working with the FHFA and Congress to advance further updates to credit scoring, ensuring more qualified borrowers have a fair opportunity to buy a home and achieve the American dream.
