New Credit Scoring Rules Could Help More Homebuyers Qualify for a Mortgage

If a mortgage application was turned down because a credit file was too thin or did not fit traditional scoring methods, it may be worth applying again. A newer scoring model could now help some borrowers get approved, and estimates suggest millions of people may newly qualify.

Mortgage lenders now have the option to use VantageScore 4.0, a more inclusive credit scoring model, alongside the long-used FICO score for loans sold to Fannie Mae and Freddie Mac, which back most U.S. mortgages.

In a recent post on X, FHA Director Bill Pulte said the agency would use the same pricing grid for both VantageScore and FICO after hearing from lenders and consumers.

“The enlargement of the credit requirement will lead to more first-time buyers coming on to the market,” said NAR Chief Economist Lawrence Yun. “This is great news for financially responsible people in America.”

The shift could allow about 5 million more potential buyers to qualify for homeownership, with roughly $1 trillion in additional mortgage activity expected. But the change is still a “lender choice” system, so not every lender will adopt VantageScore 4.0 right away. Even though loans sold to Fannie Mae and Freddie Mac set the industry standard, borrowers may still need to look for lenders that use the new model.

What is changing for borrowers and lenders

For years, mortgages delivered to Fannie Mae and Freddie Mac relied on credit scores from one model: classic FICO. Now the Federal Housing Finance Agency is giving lenders more flexibility.

“Ultimately, it gives lenders a choice: FICO or VantageScore 4.0,” said Omer Reiner, a real estate agent and president of FL Cash Home Buyers. “FICO has been used to determine creditworthiness since 1989. Over time, it became clear that FICO's formula did not accurately show the creditworthiness of many applicants, who were rejected as loan candidates.”

VantageScore 4.0 includes alternative data such as rent, utility, and telecommunications payments.

“VantageScore doesn't require a lengthy credit history and uses things like payments for rent and utilities to be included in the mix for loan determination,” Reiner said. “That opens up homeownership to a much larger pool of people because now, lenders will have more accurate data to decide who gets a loan.”

It also removes the need for recent credit activity and eliminates the six-month credit file age requirement.

“While FICO scores consider tradelines with a minimum age of six months and at least one account reporting in the last six months, VantageScores can use data with just one month of history and one account reported in the last 24 months,” said Naeem Siddiqi, a senior risk adviser at data and AI provider SAS.

VantageScore says this approach can generate scores for 33 million more Americans than traditional models.

How to know whether you may qualify

Because adoption of VantageScore 4.0 will vary by lender, there is no universal answer yet for every borrower. Still, some groups may be more likely to benefit if they apply with a lender using the new model.

For instance, younger applicants with limited credit histories that have not produced strong FICO scores may be in a better position.

“For those with infrequent credit use, thin files, or very new files, VantageScores can offer an advantage by providing a score,” Siddiqi said.

That could help people who reliably pay rent, cellphone, utility, and other bills, but have not had enough traditional credit activity to prove it. Instead of being penalized for limited history, they may now receive a score.

Borrowers with a long credit history but little recent credit use may also benefit, since VantageScore 4.0 can reflect years of responsible behavior and current bill-paying patterns.

In some cases, a borrower may have strong credit with only one major bureau, such as Experian. VantageScore uses a tribureau approach, drawing from all three major credit bureaus, while FICO scores are tied to each bureau individually.

“This means that VantageScores use more comprehensive data, while your FICO score may be lower at bureaus where you don't have as much history,” Siddiqi said.

If you think you are in a stronger position to qualify than before, you will still need to find a lender that has adopted VantageScore 4.0. The Veterans Administration and several Federal Home Loan Banks have already begun accepting it.

How to put yourself in the best position

There are several steps prospective borrowers can take to make the most of this shift.

When comparing mortgage options, ask lenders directly whether they accept VantageScore 4.0 for loans sold to Fannie Mae and Freddie Mac.

If you are a veteran, start with VA-approved lenders. Do not assume every lender has made the switch, and be prepared to contact more than one.

You may also need to build your alternative credit file, which can take some effort.

“Credit bureaus don't get automatic reports on rent or utility payments,” Reiner said. “If you want to use VantageScore, you will have to track all of those payments to have the information included in your financial files. That can be a lot of work, and it's easy to lose track of documents. So your best bet is to pay by credit card or hire any of the third-party companies that track those payments for you.”

Several services can help track and report rent payments to credit bureaus. If you have rented from the same landlord for years, ask for written verification. Make sure your utility and telecommunications providers report your payments, and check your credit report to confirm the information is appearing.

It is also important to understand where you stand under both systems. Get your Classic FICO score through your bank or credit card issuer, and check whether VantageScore is available through other services. Knowing both numbers can help you decide whether it is worth seeking out lenders that use VantageScore 4.0.

The fundamentals of borrowing still apply

A more complete credit score may make a mortgage easier to get, but the rest of the financial picture still matters. Income and employment verification requirements have not changed. Lenders will still review your debt-to-income ratio, and you will still need a down payment.

What VantageScore 4.0 changes is who can be scored and how certain payment behaviors are weighed. It broadens access by recognizing more people as creditworthy, but it does not change the basic standards for being a qualified borrower.

The takeaway: if you were told you could not get a mortgage because your credit history was too limited, this update could create a real opening. But taking advantage of it will still require effort: finding the right lender, documenting your payment history, and making your case. The path to homeownership may be wider now, but you still have to step through it.