Changes come for some mortgage applicants
Fannie, Freddie using Vantage, in addition to FICO, to find eligibility
By: Andrea Riquier
USA Today
..... A regulator's decision to allow a big change to the way mortgages are underwritten is meriting a mixed reception form housing and finance professionals.
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"Effective today, [07/16/2025] to increase competition to the Credit Score Ecosystem and consistent with President Trump's landslide mandate to lower costs, Fannie and Freddie will ALLOW lenders to sue Vantage 4.0 Score," Bill Pulte, the head of the Federal Housing Fiance Agency, tweeted on July 8. [2025]
..... FHFA oversees Fannie Mae and Freddie Mac, the two giant government-sponsoed enterprises that guarantee nearly half of all mortgage debt in the United States. Fannie and Freddie buy loans from banks and other financial institutions.
..... In this case, Pulte was referring to VantageScore, a company that offers credit scores - numerical representations of how likely a borrower is to repay a loan. Lenders who offer mortgages with the intention of selling them to Fannie or Freddie now have the option either to use VantageScore or to continue to use FICO, a competitor, to assess a borrower.
..... "FHFA's announcement to allow lenders to have a choice of credit score models to use when delivering loans to Fannie Mae and Freddie Mac could help to accomplish the goals of added competition in the credit score space and reduced consumer costs., if implemented correctly,: the Mortgage Bankers Association, an industry group representing lenders, said in a statement.
..... "We need more competition among credit bureaus and an end to monopolistic practices to lower prices and improve accuracy,' Sharon Cornelissen, director of housing for the progressive Consumer Federation of America, told USA Today in an email.
..... But some consumer advocates believe the introduction of VantageScore into the mortgage space will actually decrease completion by consolidating industry share more firmly in the hands of TransUnion, Experian and Equifax, the three credit bureaus, which own the company.
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"The big three credit bureaus are fiscally a functional monopoly,: said Chi Chi Wu, director of consumer reporting and data advocacy at the national Consumer law Center. "If you want a mortgage, you have to pull all three reports. You have no choice, They created VantageScore to try to drive FICO out of the market because they want the whole market. FICO is the only independent actor."
..... Anthony Hutchinson, who heads public affairs for VantageScore, told USA Today that the company's model - the information it compiles on consumers to offer lenders information on their creditworthiness - is "more holistic" than FICO's
..... Among other things, Hutchinson said, VantageScore's model is able to blend consumer information over a period of time. This "trended" approach is more useful than just looking at a consumer at one moment in time, he argues, because it can show whether that person's financial health is improving or weakening.
..... VantageScore also claims there are 22 million Americans who are "credit invisible" - that is, they have no credit score at all - and whom the company's more modern approaches to collecting data do better at scoring.
..... But Wu says she doubts those numbers.
..... In fact, the Consumer Financial Protection Bureau recently released research that suggests the number of Americans who are credit invisible is only about one-tenth that estimate, or roughly 2.7 million people.
..... In response to USA Today's request for comment, a FICO spokesperson emailed: "FICO welcomes competition on a level playing field among credit score providers. We compete vigorously in every U.S. consumer credit market, and the FICO Score is freely chosen by lenders, investors, and other market participants because it is trusted as the most predictive and reliable credit score. FICO scores are the industry standard and preferred choice for evaluating creditworthiness in the mortgage process, regardless of whether the loan is conforming or nonconforming."
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Opening up the credit scoring space to real competition gets bipartisan support Pultie's decision has its origins in legislation introduced years ago by Senators Tim Scott, R-south Carolina, and Mark Warner, D-Virginia, Hutchinson said.
..... The legislation, the Credit Score Competition Act, was signed into law in 2018 as part of the Economic Growth, Regulatory Relief, and Consumer Protection Act, but FFA took several years to decide how to implement it.
..... Wu believes the slower approach was for the best, given the number of stakeholders involved in making such a big transition. "I think changing a well-thought-out decision that was the result of a lot of process by an arbitrary tweet is bonkers," she said.
..... Aside form concerns about the industry backdrop, VantageScore's presence might not even make a difference for consumers in terms of immediate savings. When asked about how much less one of its scores would cost compared to a FICO score, the company deflected the question to the credit bureaus, Equifax and Experian did not immediately respond to a request for comment, and a TransUnion spokesperson referred USA Today to an industry group for more information.
..... CFA's Cornelisssen, despite her support for the step, acknowledged the savings will be in the "tens of dollars."