Fannie Mae and Freddie Mac will allow lenders to use VantageScore 4.0, a tri-bureau credit scoring model from VantageScore Solutions, according to Federal Housing Finance Agency (FHFA) Director Bill Pulte, who made the announcement Tuesday via a social media post on X. Pulte added that the move is designed to “increase competition to the credit score ecosystem.”

VantageScore 4.0 supports a “tri-merge” credit scoring model, meaning it uses data from the three major credit bureaus — Equifax, Experian and TransUnion — and combines them into a single report. According to the company website, it also uses “machine learning to look closer into the credit histories of consumers often overlooked by lenders due to a lack of credit history.”

VantageScore claims to be the first credit scoring model to incorporate rent payment data when it is available in a consumer’s credit file. Pulte referenced this distinction in a subsequent social media post.

“We are expanding credit access to millions of forgotten Americans — people who live in rural areas, renters who pay their rent on time every month — and bringing down closing costs,” Pulte wrote. “Credit history will no longer just include credit cards and loans. This is HUGE.”

He later posted, “If you’re likely to pay your rent, you’re likely to pay your mortgage,” adding that “today changes mortgages FOREVER.”

VantageScore noted in a press release that the FHFA had mandated in October 2022 that Fannie and Freddie accept mortgages scored by VantageScore. However, that directive, issued by then-FHFA Director Sandra L. Thompson, came with a three-year grace period to implement the change.

Silvio Tavares, president and CEO of VantageScore, stated in the release that the FHFA’s long-expected decision to accept VantageScore 4.0 will “revolutionize the American mortgage market and grant millions of creditworthy Americans the golden opportunity to own their homes.”

The incorporation of Vantage 4.0 by Fannie and Freddie into the consumer credit check process provides an alternative to the traditional FICO score from Fair Issac Corp.

In May, Pulte had expressed displeasure with FICO cost increases and teased changes to Fannie Mae and Freddie Mac’s credit report policies. Fannie and Freddie, which are government-sponsored enterprises (GSEs) overseen by the FHFA, purchase mortgages from lenders and package them as mortgage-backed securities, which are sold to investors on the secondary market.

Industry responses

The Community Home Lenders of America (CHLA) praised the announcement in a statement provided to Scotsman Guide by CHLA Executive Director Scott Olson, calling the tri-merge option to use VantageScore “a win-win” for both consumers and for lenders.

“CHLA has long advocated — starting with our January 2024 white paper on the subject — that FHFA use this type of flexible approach to create more opportunities for borrowers to qualify for a loan,” the CHLA statement read.

That 2024 white paper argued that allowing another credit scoring model while retaining a tri-merge requirement would serve a greater range of borrowers, since government loan programs from the Federal Housing Administration, Department of Veterans Affairs and U.S. Department of Agriculture currently require a tri-merge credit review.

“We believe the goal of serving underserved communities can be accomplished through a much less complex and disruptive implementation: Simply require one of the two new scoring models to be used — at the choice of the lender and consumer — with the continued requirement of a tri-merge,” the white paper stated.

Satyan Merchant, senior vice president of auto and mortgage at TransUnion, also applauded the announcement.

“Director Pulte’s comments demonstrate a commitment to responsible mortgage lending and preserving the best possible outcome for consumers, which is exactly what the tri-merge represents,” Merchant stated. “Today’s announcement means more choice for lenders and more certainty for mortgage markets, which puts homebuyers on better footing long-term.”

The latest change to the GSE credit score requirements follows the delay of a proposed shift to a “bi-merge” model.

In October 2022, the FHFA announced plans to shift from the Classic FICO tri-merge credit score model to a bi-merge model in which lenders who sell loans to Fannie or Freddie will be required to pull FICO 10T and VantageScore 4.0 reports from two different credit bureaus. However, the implementation of that transition was pushed back from the fourth quarter of 2025 to a “to-be-determined date,” according to an announcement in January by Freddie Mac.