By Naveen Athrappully

The Federal Housing Administration (FHA) has joined with Fannie Mae and Freddie Mac to implement new mortgage credit scoring models, aimed at making homebuying more affordable for Americans, the Department of Housing and Urban Development (HUD) said in an April 22 statement.

FHA will now allow the use of VantageScore 4.0 and FICO 10T as eligible credit scoring models for underwriting FHA-insured mortgages. Both Fannie Mae and Freddie Mac are open to immediately accepting Vantage-scored loans from approved lenders, HUD said.

“This historic move is intended to lower costs for the American people after years of rising prices under the status quo credit score system,” the department said.

Currently, Fannie and Freddie use the Classic FICO model for credit scoring individuals. A FICO score measures the creditworthiness of a person by taking into consideration the individual’s payment history, length of credit history, utilization of credit, and other factors. FICO scores are used by the top 90 U.S. lenders for credit assessment.

The new credit scoring models take into account a wider range of a person’s transaction history, such as rent payments, to assess the credit risk more accurately. This could enable individuals who would not have qualified under the old scoring model to access mortgage loans.

“If you pay your rent and utilities on time, your credit score should reflect it. FHA is moving forward with two modern credit scores that give homebuyers credit for paying their rent and utilities—increasing accuracy for lenders and opportunity for first-time buyers,” HUD Secretary Scott Turner said in an April 22 post on X.

However, including rental and utility data points in the mortgage credit report may pose certain downsides to consumers, according to the National Consumer Law Center.

Millions of tenants who missed their rent payments can have negative information on their credit reports, making it difficult for them to secure rental properties in the future, according to a 2022 report from the National Consumer Law Center.

Even recording only positive rental payments also comes with risks, the report said. If in some months, these rents are not recorded in credit reports, or lower rental amounts than usual are shown, a landlord assessing a prospective tenant may view such information as proof of the person having failed to pay rent for that month, it said.

The organization cited a 2021 report from the Government Accountability Office, which said that even though including alternate data, such as rental payments, could improve credit scores of certain individuals, it was unclear whether this would be “sufficient to qualify many additional consumers for lower-cost mortgages.”

New Credit Scoring Models

FICO 10T, the latest generation of FICO credit score, takes into account “trended data” of an individual when considering creditworthiness, according to a Jan. 6 post by credit bureau Experian.

“Most credit scoring models calculate your score by analyzing the information in one of your credit reports from Experian, TransUnion or Equifax. The analysis often focuses on the most recently reported data, but the FICO Score 10T also looks for trends from at least the last 24 months of history,” the post said.

“For example, your credit utilization often varies from month to month, and most credit scores only consider your most recent utilization rate. But the FICO Score 10T can additionally consider whether your credit utilization rate has been increasing or decreasing over time.”

VantageScore 4.0 is the latest scoring model from VantageScore and enables scoring an additional 33 million adults. The metric opens up credit access to around 94 percent of American adults, the company said.

According to Turner, the addition of new credit scoring models advances the full implementation of the Credit Score Competition Act of 2018, which was signed into effect by President Donald Trump during his first term in office. The Act aims to bring greater flexibility and choices to borrowers.

“By embracing additional predictive credit scoring models, we are taking a meaningful step toward expanding access to homeownership—particularly for creditworthy borrowers who may have been overlooked under older systems,” Turner said.

“This exciting announcement is in service to President Trump’s promise to restore the American Dream of homeownership.”

Improving Housing Access

In an April 22 statement, Fannie Mae said that the use of new credit scoring models aims to foster competition and innovation in credit scoring, potentially lowering lending costs.

The new models take into account additional data that could provide a “more complete view of borrower creditworthiness,” such as a history of on-time rental payments.

“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 the Single-Family division at Fannie Mae.

While both Fannie Mae and Freddie Mac have begun accepting mortgage loans assessed using VantageScore 4.0, FICO Score 10T will be accepted at a later date.

The inclusion of new credit-scoring models in mortgage lending decisions is one of the latest steps the Trump administration has taken to ensure housing affordability for Americans.

In other measures taken by the administration to curb home prices, Trump signed an executive orderearlier this year restricting Wall Street companies from purchasing single-family homes in the United States.

Trump signed another order in March that seeks to cut down regulatory barriers to building homes. The president said in the order that “layers of unnecessary” red tape were restricting the supply of homes and pushing up housing costs.