A major shift in mortgage lending is here—and it’s one that every real estate agent should be aware of, especially if you work with first-time buyers or clients with limited credit histories.
The Federal Housing Finance Agency (FHFA) recently approved the immediate use of Vantage Score 4.0 for loans backed by Fannie Mae and Freddie Mac. This marks a significant departure from the long-standing reliance on FICO scores and could unlock homeownership opportunities for a broader range of buyers.
Unlike traditional FICO models, Vantage Score 4.0 considers a wider range of payment history—including rent, utilities, and telecom bills—which have historically been ignored in mortgage credit evaluations. It also incorporates trending data, analyzing how a borrower’s financial behavior evolves over time, rather than capturing just a single moment. This means borrowers who are on the path to improving their credit can be recognized for their progress, not just their past.
The standard FICO model, in contrast, excludes rental and utility payments and only reflects a static point in time. As a result, many responsible renters or financially recovering borrowers have been unfairly left out of the homebuying process. This change could be a game-changer for them.
The push for this update has been years in the making, originating from bipartisan efforts in Congress and gaining support from consumer advocates and financial institutions alike. While the FHFA's announcement allows for immediate use, Fannie Mae, Freddie Mac, and lenders still need time to update their systems and assess how Vantage Score will impact risk modeling and Loan-Level Price Adjustments (LLPAs).
In the meantime, real estate professionals can help clients prepare. Because rental and utility reporting aren’t automatic, clients may need to take proactive steps, such as:
- Paying rent through traceable methods (avoid cash).
- Enrolling in third-party services that report rent and utility payments to the credit bureaus.
If you have clients who’ve been sidelined due to credit challenges, this development could offer the fresh start they need. Let’s ensure they know what’s possible—and that they’re working with lending partners who are ready to guide them through it.
Christi Wedig is a senior loan originator at CMG Home Loans.
