Fannie Mae, Freddie Mac and the Federal Housing Administration are now accepting alternative credit score models in an effort to expand mortgage access.
All three will begin accepting VantageScore 4.0 and FICO 10T as eligible credit scoring models for mortgage underwriting.
"By embracing additional predictive credit scoring models, we are taking a meaningful step toward expanding access to homeownership — particularly for creditworthy borrowers who may have been overlooked under older systems," said Scott Turner, Secretary of the Department of Housing and Urban Development, in a statement.
VantageScore 4.0 is a predictive tri-bureau credit scoring model that uses "trended" data and machine learning to look at a consumer's credit behavior over time. The score includes rental, utility and cellphone payment data, which allows it to create scores for 33 million more people than previous models, including people who have limited credit histories.
FICO 10T is also a predictive model using trended data to analyze 24-plus months of credit history, rather than just a current snapshot.
Federal housing officials say the changes could expand mortgage eligibility for tens of millions, especially among first-time buyers. Analysts say competition between scoring models could reduce credit reporting costs by roughly $100 per loan.
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