Fannie Mae and Freddie Mac are overhauling how borrowers can qualify for mortgages, opening the door to credit scores that factor in rent and utility payment history.
The government-backed mortgage giants announced Wednesday they will begin accepting loans evaluated using VantageScore 4.0, a newer scoring model that incorporates non-traditional data such as rental and utility payment records. The rollout will begin on a limited basis with approved lenders before expanding more broadly.
The change is part of a broader credit score modernization effort led by the Federal Housing Finance Agency (FHFA). “Fannie and Freddie are ready to immediately start working with approved lenders to accept VantageScore loans,” said FHFA Director William Pulte at a press conference.
Pulte credited the shift with enabling more Americans to build creditworthy profiles based on how they actually manage household expenses. “If you paid your rent for 10 years, that should be factored into your credit score,” he said. He estimated the change could affect tens of millions of borrowers.
Freddie Mac has already begun testing the model, accepting roughly $10 million in VantageScore-evaluated loans for securitization.
Under the initial phase, approved lenders can choose between VantageScore 4.0 and traditional FICO scores when originating loans.
A second model, FICO Score 10T, is also in the pipeline. Like VantageScore 4.0, it incorporates both positive and negative rental payment history reported to credit bureaus.
“By incorporating newer models with more predictive power, we can support sustainable access to homeownership and keep safety, soundness and operational readiness at the center,” said Jake Williamson, executive vice president and head of single-family at Fannie Mae.
Federal regulators approved both VantageScore 4.0 and FICO 10T in 2022 after extensive testing. Pulte signaled the impending shift last year, posting on X that “credit history will no longer just include credit cards and loans.”