Fannie Mae and Freddie Mac will now consider a potential homebuyer's VantageScore 4.0 alongside the traditional FICO 10T model in assessing mortgage applicants.
The Federal Housing Finance Agency (FHFA) decision allows mortgage lenders to choose either credit scoring model without system reconfiguration, aiming to increase competition and lower costs.
VantageScore 4.0 can integrate alternative data like rent and utility payments to broaden mortgage access for renters, rural residents, and those with limited credit histories, potentially opening homeownership to five million more people.
The announcement affected FICO stock, causing shares to drop, as the move challenges FICO's dominance in the credit scoring space and may impact pricing in the future.