You’ve heard the news. FHFA Director Bill Pulte has ordered Fannie Mae and Freddie Mac to begin accepting VantageScore credit scores immediately.
The notice was informal, and has been the case lately, fired off via a tweet on the social media platform X.
It allows mortgage lenders to use VantageScore 4.0, with no requirement to build out any “new infrastructure.”
The big question though is how many lenders will adopt the FICO score alternative, and will it really lead to lower costs for consumers.
In addition, will it actually result in a sizable increase in mortgage lending volume, or is it being blown out of proportion.
VantageScore Has Been Approved for Use by Mortgage Lenders Since 2022
First some quick background. The Federal Housing Finance Agency (FHFA), which oversees Fannie Mae and Freddie Mac, approved the use of VantageScore all the way back in October 2022.
Yes, you read that correctly. Nearly three years ago. Yet pretty much every bank, lender, credit union, and broker continues to use FICO scores only.
Even before 2022, there was the 2018 Credit Score Competition Act, ironically signed into law by President Trump during his first term, which paved the road for alternative credit scores.
Despite that, the VantageScore never got adopted commercially, at least on a wide scale, and again, FICO was the only game in town.
However, that 2022 directive did require Fannie Mae and Freddie Mac to begin accepting mortgages scored with VantageScore within three years, which would be the fourth quarter of 2025.
So in effect, Pulte has simply nudged the order forward by a few months, or at least brought it more to light.
The tweet simply said “Fannie and Freddie will ALLOW lenders to use Vantage 4.0 Score.”
It doesn’t say they must use it. In other words, it’s unclear if this changes anything, or speeds things up at all.
FICO Price Increases May Be What Ushers in Change
Pulte’s tweet aside, what might actually get mortgage lenders to adopt VantageScore is the price hikes that have taken place at FICO.
Earlier this year, U.S. Senator Josh Hawley (R-Mo.) asked the Department of Justice’s (DOJ) Antitrust Division to open an investigation into FICO regarding its “anticompetitive practices.”
Hawley pointed out that the company, which faced virtually zero competition in the consumer credit scoring space, “raised score prices yet again from $3.50 to $4.95 per score for mortgage originations—a more than 40% increase” in 2024.
FICO penned a piece explaining that the royalty it collects “is the lowest among all other components commonly included in mortgage closing costs.”
But it doesn’t appear the public is buying that, nor are mortgage lenders, mortgage brokers, loan officers, etc.
So VantageScore might benefit simply from being a cheaper alternative, with the price increases top of mind for loan originators these days.
And if VantageScore truly can bring in more qualified applicants, it’ll be adopted even faster and by more mortgage companies.
Another $1 Trillion in Home Loans Could Be Eligible?
VantageScore has claimed that the introduction of “credit score competition could enable up to $1 trillion in high-quality mortgage loans,” per its own analysis.
It has noted that “older credit models routinely excluded millions of eligible borrowers” in a number of different ways.
For example, FICO may require that the applicant have recent credit activity, or that the credit file be older than six months.
These older models may also exclude alternative data sources that could prove creditworthiness, such as rent, utility, and telecom payments.
As such, those who wish to qualify for a mortgage are often sort of forced to open credit cards and/or take out auto loans/leases to build the credit necessary to move on to a mortgage.
Even if they don’t want/need credit, and would prefer to buy a car with cash, or use a debit card for their purchases.
This has always been the catch-22 for credit scores, which require you to take out credit in order to get credit.
You kind of have to play the game to be part of the game, otherwise you might be credit-invisible and barred from obtaining a mortgage.
So all those articles you’ve seen lately about “paying rent will help you buy a house” relate to the adoption of VantageScore.
However, it should be noted that VantageScore only considers rent that is either reported by the landlord to the credit bureaus, or self-reported by tenants.
In other words, it’s a big claim that might not actually make a meaningful difference if the rent isn’t actually reported.
I believe it will be in the future, as technology makes it easier to keep track of rent, but in the meantime, my guess is countless tenants and landlords don’t track rents, and therefore it won’t help you qualify for a mortgage.
Perhaps a better approach is to use credit sparingly, keep balances low, and pay it back on time, every time, to show creditors you’re responsible enough to take out a mortgage one day.
Before creating this site, I worked as an account executive for a wholesale mortgage lender in Los Angeles. My hands-on experience in the early 2000s inspired me to begin writing about mortgages 19 years ago to help prospective (and existing) home buyers better navigate the home loan process. Follow me on X for hot takes.