Mortgage Lending Evolves: Lenders Now Have More Credit Score Options

For decades, the “classic” FICO score has been the undisputed gold standard for mortgage underwriting. However, a significant shift in the homebuying process is underway. Government officials announced on April 22 that mortgage lenders are now permitted to use VantageScore 4.0 as part of their underwriting process. This move breaks the long-standing reliance on a single scoring model, potentially opening doors for consumers who have been historically underserved by traditional credit metrics.

Broadening the Scope of Mortgage Underwriting

The transition to more flexible credit scoring applies to mortgages sold to Fannie Mae and Freddie Mac, the government-sponsored enterprises that serve as the largest purchasers of mortgages on the secondary market. Federal Housing Finance Agency (FHFA) Director Bill Pulte noted during a press conference that twenty-one large mortgage lenders are part of the first wave adopting VantageScore 4.0. The impact is already visible; Pulte stated that Freddie Mac has already taken $10 million in loans approved using the new model.

The reach of these changes extends beyond the secondary market. Housing and Urban Development (HUD) Secretary Scott Turner announced that the Federal Housing Administration (FHA), which insures many loans for first-time buyers, will also soon implement these two scoring models.

Counting Rent and Utility Payments

One of the most impactful differences between the classic FICO score and the newer models is the potential inclusion of rent and utility payment history. For many consumers, these monthly obligations are their largest recurring expenses, yet they have traditionally been ignored in mortgage underwriting.

Director Bill Pulte emphasized the predictive power of this data, questioning how credit scores could exclude a major factor like rent payment history. However, this benefit is only available if the data is actually reported to credit bureaus. John Ulzheimer, president of The Ulzheimer Group and a credit expert, warns that simply renting an apartment does not guarantee the data is being reported.

Currently, VantageScore models only capture rent or utility data that consumers opt in to report to the three largest credit reporting companies: Equifax, Experian, and TransUnion. While some property managers use software to feed this data to bureaus, other renters must use third-party rent-reporting services, which may charge a monthly fee of around $10.

The adoption of this reporting is growing, albeit slowly. A TransUnion report based on a survey of 2,006 adults in March 2025 found that the share of consumers whose rent payments are reported rose to 13% last year, up from 11% in 2024. This represents a small fraction of the approximately 46.4 million renter-occupied households in the U.S., according to the Federal Reserve Bank of St. Louis.

The Shift to Trended Data

Beyond rent and utilities, the new models introduce “trended data.” While a classic FICO score provides a snapshot of a consumer’s balance at a specific moment, trended data examines credit behavior over a period of time—typically the last 24 months.

According to John Ulzheimer, this allows lenders to distinguish between two types of borrowers who might otherwise look identical on a classic score:

• Transactors: Credit card users who routinely pay off their balances in full.
• Revolvers: Borrowers who carry a balance from month to month, which generally represents a higher risk to the lender.

What This Means for Homebuyers

The move toward trended data changes the strategy for those looking to boost their credit scores before applying for a loan. In the past, borrowers could often “game” the system by aggressively paying down credit card balances a month or two before their application to trigger a score increase in a snapshot-based model.

With the introduction of VantageScore 4.0 and FICO 10T, that short-term strategy is less effective. Borrowers will now need to manage their credit card debt consistently over a longer horizon to see a positive impact on their score. Those who have a history of on-time rent and utility payments, but limited traditional credit, may find these new models help them qualify for a mortgage or secure a more favorable interest rate.

Looking Ahead

As FICO 10T joins VantageScore 4.0 in the coming months, the mortgage industry is moving toward a more nuanced understanding of risk. By incorporating a broader array of financial behaviors and long-term trends, the underwriting process is becoming more inclusive, potentially lowering the barriers to homeownership for millions of Americans.