The implementation of VantageScore 4.0 by the Federal Housing Finance Agency (FHFA) and the Federal Housing Administration (FHA) represents a significant change in the way mortgage lenders assess borrowers, as highlighted by MarketWatch. Millions of creditworthy future homebuyers are expected to have new opportunities to qualify for more favorable mortgage rates this week as VantageScore 4.0 is now fully accepted by the FHFA for government-sponsored mortgages.
VantageScore 4.0 includes rent and utility payments, along with a 24-month view of payment history known as trended data. This use of trended data changes how lenders view a person’s credit history, allowing them to better assess whether a borrower’s financial situation is improving or worsening. As a result, millions more creditworthy individuals may now gain access to housing finance in ways not currently possible under traditional credit models.
One of the most impactful aspects of VantageScore 4.0 is its ability to recognize on-time rental payments, historically one of the largest monthly expenses for many Americans.
Dr. Rikard Bandebo, VantageScore’s Chief Strategy Officer and Chief Economist, said: “If someone is paying their rent regularly, it’s a strong signal they will do the same with a mortgage.” By including these payments alongside utility data, the model allows borrowers to demonstrate responsible financial behavior that legacy credit scoring models currently overlook.
Dr. Bandebo added: “If renters are thinking about buying a house and trying to improve their credit score, they should check if their landlord is reporting their on-time payments to credit bureaus. If the landlord is not, some states like California require them to make those reports at the tenant’s request. Reporting on-time payments may boost some scores by 100 points.”
Read VantageScore’s recent white paper on the credit score benefits of reporting positive, on-time rental payments.
VantageScore 4.0 continues to improve the mortgage ecosystem by leveraging both traditional and alternative data, enabling millions more Americans to become homeowners while helping lenders make better decisions.
For more information on VantageScore 4.0 implementation, please visit VantageScore’s Mortgage resource center.
