July 18, 2025

Good News for Homebuyers: A New Credit Score Option is Here

All I can say is, it’s about time! Fannie Mae and Freddie Mac, the two government-sponsored enterprises backing about 70% of U.S. mortgages, will now allow lenders to use VantageScore 4.0 as an alternative to the long-dominant FICO score.

For years, FICO has basically been the only company providing credit scores, which has given them a near-monopoly on credit scoring in mortgage underwriting. This change, effective immediately, provides potential homebuyers with an extra boost that could either help to qualify them for a mortgage or reduce the cost of the loan.

What Is VantageScore 4.0?

VantageScore was developed by the three major credit bureaus Equifax, Experian, and TransUnion to provide a modern scoring model. Just like FICO, it uses a 300 to 850 scale, but it’s designed to better evaluate people with either limited or non-traditional credit histories. It will now include a borrower’s history for things like rental, utility, and telecom payments in determining their score. These have traditionally not been included in FICO credit reports, which has never made sense to me as these bills are as much a reflection of someone’s willingness to repay as are auto loans & credit cards.

How This Helps More Buyers Qualify

Many potential homebuyers are financially responsible but remain locked out of the mortgage market because they have either not established a lot of credit, or don’t have a long credit history. Under the old model, rent and utility payments typically weren’t counted. Now, those who’ve consistently paid rent and kept up with utilities may qualify for conventional loans from Fannie Mae and Freddie Mac. This is especially good news for renters who pay on time but don’t use traditional credit products…it can be a game-changer for a lot of folks.

National Association of Realtors Executive Vice President and Chief Advocacy Officer Shannon McGahn said “This is a major step toward a more accurate and equitable mortgage underwriting process, one that considers timely rent, utility and telecom payments as indicators of creditworthiness…these are real-world factors that show how people pay their bills and should count when determining if someone qualifies for a mortgage.”

Federal Housing Finance Agency Director Bill Pulte supports the shift and has committed to making it easier for lenders to adopt the new model:

“We will be incentivizing lenders who use both Vantage 4.0 and FICO with better pricing- anything to help the consumer.”

A Push for Competition and Lower Costs

There’s also a financial benefit here. Credit report fees have gotten ridiculous in recent years. What used to cost a buyer $30–$40 is now $150+ in many cases. Allowing lenders to use both VantageScore and FICO could finally bring some much-needed competition to FICO’s stranglehold.

If you’ve been shut out of conventional mortgage options due to a thin credit file, this change might finally tip the scales in your favor.