Improving Mortgage Eligibility with New Credit Scoring Models
Financial influencer, Taylor Price, recently shed light on how changing one’s perspective can contribute to building wealth and fulfilling the American dream. He explained how Fannie Mae and Freddie Mac, two government-backed mortgage giants, are changing the game for Americans looking to qualify for a mortgage.
A New Era for Credit Scores
In their latest move, these mortgage giants announced they would now accept loans assessed using VantageScore 4.0, a credit scoring model that takes into account data like rent and utility payment history. This change is part of a larger initiative led by the Federal Housing Finance Agency (FHFA) to modernize credit scores.
Expanding Access to Homeownership
FHFA Director William Pulte lauded the move, stating it was only possible due to President Trump’s leadership. He also noted that this change would be implemented gradually, starting with a group of approved lenders. Furthermore, the average monthly mortgage payment has hit a new high, exceeding $2000 for the first time ever. To read more about this, check out this article.
The Future of Credit Scoring
Another updated model, FICO Score 10T, will be introduced as part of the credit score modernization plan. This model also takes into account both positive and negative rental payment history. Jake Williamson, the Executive Vice President and Head of Single-family at Fannie Mae, expressed that the new models would lead to sustainable access to homeownership while ensuring safety and operational readiness. For more on the housing market trends, check this article.
Long-Awaited Modernization
The journey to modernize credit scoring has been long. In 2022, federal regulators approved both VantageScore 4.0 and FICO 10T following extensive testing. Pulte also hinted at this shift last year, stating that credit history would no longer be limited to credit cards and loans. For more business news and updates, click here.
Special thanks to FOX Business’ Daniella Genovese for her contribution to this report.
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