Key takeaways: 

• VantageScore 4.0 factors in recent credit behavior and can include alternative data like rent and utility payments.
• FICO scores dominate mortgage lending and had been the preferred Fannie and Freddie model for decades.
• Lenders will decide which to use, but borrower awareness and access to scores can help them save.

VantageScore says up to an additional 5 million prospective borrowers could qualify for Fannie and Freddie mortgages. 

A policy change that allows lenders to choose the credit scoring model they use for home loans backed by Fannie Mae and Freddie Mac could be a big plus for newer borrowers and reshape mortgage underwriting.¹

The Federal Housing Finance Agency said earlier this month that lenders can select the FICO 10T model or the VantageScore 4.0 model when issuing loans that are sold to Fannie and Freddie.²

For decades, lenders have only used FICO models for the government-backed loans. The change could expand mortgage access for millions of newer buyers — especially renters and those with thin credit histories — that the Vantage model says it captures.³

Fannie and Freddie aren’t lenders. They purchase and package loans into mortgage-backed securities that get sold to investors with government guarantees.⁴ The ultimate decision on using FICO or VantageScore will be made by mortgage lenders that sell them loans.⁵

Credit scores and alternative data 

Most lenders still use FICO scores but VantageScore has also grown in popularity in recent years. Overall, 41.7 billion VantageScore credit scores were used in 2024, a 55% increase from 26.9 billion in 2023.⁶

VantageScore 4.0 uses recent credit history and so-called “alternative data” sources like rent, utility, and cell phone payments in its predictive credit score model for mortgages. It doesn’t require the consumer credit file to be older than 6 months.⁷

Up to 5 million prospective borrowers could qualify for Fannie and Freddie mortgages if lenders use its service, VantageScore says.⁸

The company was created in 2006 by the three major credit reporting bureaus Experian, Equifax, and TransUnion — which also provide their data to Fair Isaac Corp. for FICO scores.⁹

FICO, founded in 1958, says its scoring models are used by more than 90% of top lenders for all types of credit. It was the mortgage industry standard in 1995 when Fannie and Freddie mandated its use for loans guaranteed by them.¹⁰

Both FICO and VantageScore produce scores on the 300–850 scale, but they can yield different numbers for the same borrower because they rely on their own unique algorithms and weigh elements of a person's credit history in different ways.¹¹

Read more: What is the average credit score? See how you compare

Lenders get credit score 

A 2018 law required the FHFA — Fannie and Freddie’s regulator — to consider alternative credit scoring.¹² The agency had been considering a plan for lenders to use both FICO and VantageScore for mortgage applicants, prior to this month’s announcement allowing them to pick one.¹³ 

The new move could have broad implications because Fannie and Fredde’s practices are widely followed. The two companies back single-family conventional loans up to $806,500 in most of the U.S. and guarantee roughly 70% of the U.S. mortgage market.^14,15

But much depends on the preferences and comfort levels of lenders and investors that ultimately buy the loans. Lenders have more experience with FICO, which remains dominant in the mortgage market, but Vantage scores are growing in use.¹⁶

Fannie and Freddie can force lenders to buy back a mortgage if there is a problem with the underwriting or if the loan doesn’t meet other standards — a process known as a mortgage putback.¹⁷

Read more: What is a conventional loan?

For mortgage borrowers, it pays to know 

Almost half (45%) of Americans say  financial happiness means owning a home, according to Empower research.

Awareness of credit score models can help borrowers get there. Credit card companies, banks and other lenders often offer free FICO scores to their customers, and some banks and online financial sites also offer VantageScore for free.¹⁸

It’s also important to note that credit scores are just one component of a lender’s decision. Several factors including down payments, annual income, savings, and total debt play a part in loan approvals and terms.¹⁹

Shopping around is also a good idea, particularly when rates are high. A Freddie Mac study found that borrowers who got at least two quotes saved about $600 annually when rates were near 7% in September and October 2022. Borrowers with four quotes averaged $1,200 in annual savings.²⁰

Read more: Who needs perfect? For credit scores it pays to be the in the ballpark