Fannie and Freddie to accept VantageScore 4.0 alongside FICO
The U.S. mortgage landscape is undergoing a major shift as Fannie Mae and Freddie Mac will now allow lenders to use VantageScore 4.0, offering borrowers an alternative to the dominant FICO model. This change, announced by Federal Housing Finance Agency Director Bill Pulte, is expected to broaden access to home loans, particularly for underrepresented borrowers.
Fannie and Freddie currently back about 70% of the U.S. mortgage market. Until now, they relied exclusively on FICO scores to determine borrower eligibility and pricing. The addition of VantageScore is intended to lower closing costs, introduce competition in the credit scoring space, and recognize additional data points like rent and utility payments.
Millions could benefit, especially underbanked Americans
VantageScore, developed by the three major credit bureaus in 2006, operates on the same 300-850 scale as FICO but uses different methods to assess creditworthiness. Its latest model, 4.0, incorporates non-traditional credit data, helping more Americans — especially those with limited or no traditional credit — qualify for a mortgage.
Pulte emphasized the significance of the move, writing: “Credit history will no longer just include credit cards and loans. This is HUGE.” Mortgage experts estimate the change could impact up to 5 million potential borrowers, offering a path to homeownership that had previously been out of reach.
Rick Roque of NFM Lending noted that many in Black, Latino, and immigrant communities remain “underbanked” and disproportionately rent. Including rental history in credit evaluations helps bridge that gap and open the door to homeownership.
More competition may mean lower costs for borrowers
Beyond expanding eligibility, the move could also pressure credit report prices to come down. The cost of mortgage credit reports has soared in recent years — now often exceeding $140 and in some cases nearing $300. Since most of these fees are passed on to borrowers at closing, introducing competition could provide financial relief.
The Consumer Financial Protection Bureau has flagged credit report inflation as part of a broader investigation into so-called “junk fees.” The FHFA has now indicated it will incentivize lenders to use both scoring models by offering more favorable loan pricing when both are applied.
Limits still apply under strict lending standards
Despite the change, qualifying for a mortgage will still require a solid income, sufficient assets, and meeting the agencies’ underwriting standards. Borrowers will also need to work with lenders who adopt the VantageScore model. But mortgage professionals say the new option could move some applicants from FHA loans into better-priced conventional mortgages, depending on how their scores compare across the two systems.
