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WASHINGTON — VantageScore 4.0 is now available to all lenders approved to sell mortgages to Fannie Mae and Freddie Mac. The expansion gives lenders a second credit-scoring option after decades of relying on Classic FICO.

Federal Housing Finance Agency Director Bill Pulte announced the change Thursday. He directed Fannie Mae and Freddie Mac to expand VantageScore beyond an initial rollout involving 50 lenders, according to Reuters.

The change could help some renters and people with limited credit histories. However, it does not guarantee mortgage approval or give borrowers the right to choose which score their lender uses.

VantageScore rollout expands beyond 50 lenders

Fannie Mae and Freddie Mac do not lend money directly to homebuyers. They purchase and guarantee mortgages from approved lenders, providing support for much of the conventional mortgage market.

For decades, those loans generally relied on versions of the Classic FICO model. The government validated VantageScore 4.0 and FICO Score 10T as alternatives in 2022, but implementation took several years.

FHFA began moving forward with VantageScore 4.0 through a limited rollout. Pulte said the first 50 participating lenders successfully delivered loans using the model, clearing the way for broader access.

The new directive allows every approved Fannie Mae and Freddie Mac lender to seek authorization to use VantageScore. Fannie Mae’s current selling guide instructs interested lenders to contact their account teams for program requirements and delivery instructions.

That means the federal authorization is immediate, but individual lenders may still need time to complete operational steps.

How VantageScore 4.0 evaluates credit

VantageScore is jointly owned by Equifax, Experian and TransUnion. Like commonly used FICO models, VantageScore 4.0 produces scores on a scale from 300 to 850.

The models do not calculate scores in exactly the same way. VantageScore 4.0 uses trended credit data, which examines how a consumer’s balances and payment behavior change over time. It can also consider rental-payment history when that information appears in a consumer’s credit file.

FHFA said newer models may offer a more complete assessment of borrowers who have limited traditional credit histories. The agency specifically identified responsible renters as one group that could benefit when it announced the implementation in April.

On-time rent does not automatically appear on a credit report. A landlord, property manager or rental-reporting service must provide that information to at least one credit bureau.

The Consumer Financial Protection Bureau confirms that the three nationwide credit bureaus accept rental-payment information. However, their treatment of that information can vary.

Borrowers cannot require a particular score

The expansion gives lenders more flexibility, but it does not transfer the decision to borrowers.

Under the current FHFA framework, an approved lender may use either Classic FICO or VantageScore 4.0 for an eligible loan. The lender selects the model for each loan it delivers to Fannie Mae or Freddie Mac.

A lender cannot combine scores from both models on the same delivered loan during this interim phase. Classic FICO also remains available and has not been eliminated from mortgage underwriting.

Prospective buyers can ask whether a lender offers VantageScore 4.0. Those who believe the newer model better reflects their payment history may also compare lenders before submitting a full application.

However, a borrower cannot force a lender to use VantageScore simply because it produces a higher number.

A different score does not guarantee approval

Credit scores represent only one part of mortgage underwriting. Lenders also evaluate income, employment, existing debt, available assets, down payment funds and the property securing the loan.

A higher VantageScore therefore does not guarantee approval. It also does not guarantee a lower interest rate or reduced closing costs.

The change may prove most useful for borrowers whose responsible financial behavior does not appear fully under an older scoring model. That could include renters with reported payment histories and consumers with relatively few conventional credit accounts. Even with broader scoring options, first-time buyers still face high prices and limited affordable inventory. USA Herald previously examined how the housing market divide is locking many first-time buyers out.

Applicants should also remember that a score shown through a banking app or free consumer service may differ from the score used for a mortgage. Credit models and bureau data can produce different results.

What prospective homebuyers should do

Consumers preparing to apply for a mortgage should review their reports from all three credit bureaus. Checking a personal report does not lower a credit score, according to the Consumer Financial Protection Bureau.

Borrowers can obtain federally authorized free reports through AnnualCreditReport.com. They should dispute incorrect balances, unfamiliar accounts and inaccurately reported late payments before applying.

Renters can ask whether their landlord reports payments to any credit bureau. A rental-reporting service may also provide that option, although consumers should examine its fees and determine which bureaus receive the information.

Prospective buyers should then ask mortgage lenders three questions: whether they use VantageScore 4.0, whether the model is available for the specific loan under consideration and whether choosing it would affect the loan’s pricing.

Credit-score competition enters a new phase

Congress ordered FHFA to establish a process for approving modern credit models through the Credit Score Competition Act of 2018. Regulators later approved VantageScore 4.0 and FICO Score 10T, although FICO 10T has not yet entered broad use for Fannie Mae and Freddie Mac loans.

Pulte said the expanded VantageScore rollout ends FICO’s exclusive position in the government-supported mortgage market. He has also accused the three credit bureaus of overcharging consumers and said FHFA is considering additional credit-reporting reforms.

Those possible reforms remain separate from Thursday’s directive. For now, the immediate change is narrower but significant: every approved Fannie Mae and Freddie Mac lender can pursue the option of evaluating mortgages with VantageScore 4.0.