FHFA Approves Use of VantageScore 4.0 for All Mortgages

2025-07-10 economy

Washington, Wednesday, 9 July 2025.
The Federal Housing Finance Agency’s approval of VantageScore 4.0 will unlock $1 trillion in new loans, expanding homeownership access to 5 million Americans previously sidelined by traditional credit scoring.

Introduction and Background

On July 7, 2025, the Federal Housing Finance Agency (FHFA) announced the immediate acceptance of VantageScore 4.0 for mortgages sold to Fannie Mae and Freddie Mac. This decision marks a pivotal shift in the U.S. mortgage market, particularly in enhancing access to homeownership for millions. It’s a part of the broader implementation of the Credit Score Competition Act of 2018, which mandates the use of modern credit scoring models to end the long-standing monopoly held by FICO scores in the United States [1][2].

Key Features of VantageScore 4.0

VantageScore 4.0 differentiates itself by utilizing alternative data sources such as rent, utility, and telecommunications payments, enhancing its predictive accuracy for credit scores. This model eliminates the prior requirement for recent credit activity and necessitates a credit file older than six months, thereby broadening qualification access for a more diverse borrower pool, particularly benefiting veterans and rural community members [3][4].

Economic Impact

The adoption of VantageScore 4.0 is projected to unleash $1 trillion in new mortgage lending, facilitating mortgage access to an estimated five million Americans previously underserved by traditional credit scoring methods. This influx is expected to significantly stimulate the housing market by increasing homeownership and competition among lenders, potentially lowering costs for borrowers [5][6].

Market Reactions and Future Implications

The introduction of VantageScore 4.0 has already influenced market dynamics, reflected in a noticeable decline in FICO’s stock price when this decision was announced, underscoring the competitive shake-up in the credit scoring industry. FHFA Director Bill Pulte emphasized that this move is designed to end decades of credit score monopoly and introduce more competition, ultimately benefiting consumers by reducing costs and expanding mortgage options [7].

Sources

mortgage access VantageScore