New credit scores are coming for homebuyers and lenders in the last quarter of 2025, but it is never to early to start to understand what is changing and how it will affect you as a consumer and possible home buyer.
The new FICO score and VantageScore Models
New credit scores are coming for lenders to use in 2025. Lenders who want to sell mortgages to Fannie Mae and Freddie Mac next year will have to begin using the new FICO Score 10T and VantageScore 4.0 scoring models by the fourth quarter, but they’ll also be allowed to submit two credit reports instead of three when calculating credit scores.
That’s the new timetable laid out Thursday by Fannie and Freddie’s federal regulator, which sees retiring the Classic FICO credit score model and implementing “bi-merge” credit reporting at the same time as a way to simplify the process.
To accommodate an “aligned transition,” the Federal Housing Finance Agency (FHFA) is instructing Fannie and Freddie to publish VantageScore 4.0 historical data early in Q3 2024, instead of Q1 2025 as originally proposed
“Synchronizing bi-merge credit reporting with the implementation of the new credit score model requirements will reduce complexity for market participants, which is a key objective of our transition efforts,” FHFA Director Sandra L. Thompson said, in a statement. “The release of historical data on tens of millions of Enterprise loan acquisitions affirms the commitment of FHFA and the Enterprises to a robust, transparent implementation process.”
Who is Using the New Credit Scores
The Enterprises” are Fannie Mae, Freddie Mac and the 11 Federal Home Loan Banks, which supply funds to community banks and other financial institutions. The Federal Home Loan Bank of San Francisco announced on Feb. 12 that it had begun accepting mortgages originated by lenders using VantageScore 4.0 new credit scores as collateral.
CrossCountry Mortgage, Movement Mortgage and Primis Mortgage Company have adopted the FICO Score 10T to qualify borrowers seeking non-conforming mortgages that don’t meet Fannie and Freddie’s underwriting requirements.
Both the FICO Score 10T and VantageScore 4.0 are touted by their backers as more accurate and inclusive than versions of the FICO Score required by Fannie and Freddie today, but some lenders had pushed back against FHFA’s timetable for moving to the new credit score models.
VantageScore, a joint venture of the three nationwide credit reporting agencies — Equifax, Experian and TransUnion — had engaged in a public relations campaign aimed at convincing regulators to stick to the Q4 2025 implementation timeline.
What Do the New Credit Scores Mean for You as a Homebuyer
These new credit scores will stand out from Classic FICO for their:
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- Implementation of alternative credit data – VantageScore 4.0 takes into account applicants’ payment histories for rent, utilities, telecom payments, etc. In turn, it can help mortgage applicants with limited loan and credit card experience generate credit scores.
- Trended data – Classic FICO can only show a snapshot of an applicant’s credit activity on the day their credit reports were pulled. In contrast, FICO 10T and VantageScore 4.0’s trended data can shed light on 24 months of credit history, making it a much more comprehensive metric of creditworthiness. While the GSEs have previously used trended data, they have not used a trended data score.
Based on rigorous testing conducted by the FHFA, these two new credit scoring models “exceed required thresholds for accuracy, reliability, and integrity.”
What is Different About These two New Credit Scores
While these new credit scores share some similarities, they also differ in some important ways. Most notably, VantageScore 4.0 will only require one month of credit history to generate a credit score. FICO 10T, on the other hand, will still require at least six months of credit history.
While lenders will be required to use VantageScore 4.0, they can extend mortgages to applicants who may otherwise be credit invisible. According to VantageScore, 37 million Americans who don’t have FICO credit scores do have VantageScore credit scores.
What Do The New Credit Scores Mean for Potential Home Buyers?
The new credit scoring models and credit score requirements have the potential to make homeownership more accessible for previously underserved markets. This is because they:
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- Expand access to credit to people with limited credit histories – Since lenders can now look at VantageScores, in addition to FICO scores, borrowers with less than six months of reported credit history may be able to qualify for mortgages.
- Extend access to credit to people with strong alternative credit data – 26 million Americans don’t have enough traditional credit data to generate a credit score. This may be because they’re young, they just recently moved to the United States, or they simply prefer using cash and debit cards in place of credit.
Since the new credit scoring models take into account alternative credit data (rent, utilities, telecom payments, etc.), they can give these otherwise credit-invisibles a chance to show off their on-time payment histories and enhance their mortgage eligibility.
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- Have the potential to reduce the racial homeownership gap – Black and Hispanic Americans are more likely to have no or low credit scores. They’re also less likely to own their homes. According to a Pew Research Center study, 58% of Black-led households and 52% of Hispanic-led households rent their homes, compared to just 27.9% of non-Hispanic, white-led households.
While FICO 10T only uses traditional and trended credit data, VantageScore 4.0 also factors in alternative credit data. Thus, VantageScore 4.0 can help more Black and Hispanic borrowers build their credit histories, qualify for home loans, and close this historic homeownership gap.
Based on these benefits, more borrowers should now more than ever have the opportunity of attaining the American Dream. If you want to talk about how the changes with the new credit scores will affect your ability to buy a home, please give me a call at 240-401-5577 or text me at lise@lisehowe.com. I would love to put you in touch with a great lender who will help you through the process of qualilfying for a mortgage.
