Fannie Mae, Freddie Mac, and the Federal Housing Finance Agency (FHFA) have introduced a major change to how lenders evaluate mortgage applicants. Lenders can now use VantageScore 4.0 alongside traditional FICO credit models, expanding access to credit for millions of Americans. This update could make mortgage loans more affordable and inclusive, especially for borrowers with limited credit history.

What Changed in Mortgage Credit Scoring

In a landmark decision, the FHFA now allows lenders working with Fannie Mae and Freddie Mac to use VantageScore 4.0 when evaluating mortgage applicants. This marks a significant shift from the long-standing reliance on FICO® scores, which have dominated mortgage lending for decades.

The introduction of VantageScore 4.0 is part of FHFA’s broader effort to modernize the mortgage industry, increase competition, and improve affordability for homebuyers.

How VantageScore 4.0 Expands Credit Access

VantageScore 4.0 uses newer, more inclusive data models that recognize nontraditional payment histories. Rent, phone, and utility payments can now positively impact your credit profile — something the FICO model often overlooks.

This change could make a meaningful difference for borrowers who have reliable payment habits but limited credit activity.

According to VantageScore’s estimates, up to 5 million additional Americans could now qualify for a mortgage under this model — expanding access to homeownership in underserved communities.

Potentially Lower Borrowing Costs

Using VantageScore 4.0 could also lower mortgage origination costs. Because it may reduce lender credit data fees, some savings could trickle down to consumers through lower closing costs or better loan pricing.

While it’s still too early to know how much borrowers might save, increased competition between FICO and VantageScore could drive pricing efficiency across the industry.

More Competition and Innovation in Credit Scoring

For decades, FICO’s dominance limited innovation in mortgage credit scoring. The FHFA’s approval of VantageScore 4.0 opens the door for competition and modernization.

With two scoring systems in play, lenders will have more flexibility to choose models that align with borrowers’ profiles. This could lead to a fairer and more transparent mortgage process for both lenders and consumers.

What It Means for Lenders and the Mortgage Market

The transition to VantageScore 4.0 doesn’t require major infrastructure changes, since the tri-merge credit report system — which uses data from Experian, Equifax, and TransUnion — remains in place.

Industry experts expect this shift to encourage innovation, expand access to credit, and enhance fairness in mortgage underwriting.

This development represents one of the most significant modernizations in U.S. mortgage credit history.

The Bottom Line

The FHFA’s decision to allow VantageScore 4.0 for Fannie Mae and Freddie Mac loans is a groundbreaking step toward financial inclusion. By recognizing alternative credit data, this move helps responsible borrowers who may have been overlooked by traditional credit models.

If you’ve struggled to qualify for a mortgage due to limited credit history, this update could make homeownership more attainable. As more lenders adopt VantageScore 4.0, expect broader access, fairer pricing, and a more accurate reflection of creditworthiness across the housing market.

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