Financial influencer Taylor Price joins ‘Varney & Co.’ to break down how shifting your mindset can help Americans expand wealth and achieve the American Dream.
Key Takeaways:
- Expanded Mortgage Access: Fannie Mae and Freddie Mac’s adoption of VantageScore 4.0, incorporating rent and utility payment history, is poised to unlock homeownership for “tens of millions” of Americans, particularly those with thin credit files or non-traditional credit histories. This represents a significant shift in the credit assessment paradigm.
- Increased Competition & Modernization: The move introduces greater competition in the credit scoring market, challenging FICO’s long-standing dominance. It’s part of a broader, FHFA-led modernization effort aimed at enhancing predictive power and ensuring a more inclusive, sustainable housing finance system.
- Potential for Market Rebalancing: While not a silver bullet for housing affordability, this policy change could gradually rebalance housing demand dynamics by broadening the pool of eligible buyers. Lenders will face operational adjustments and new opportunities, while investors in mortgage-backed securities may see a diversification in underlying loan characteristics over time.
In a seminal shift set to redefine the contours of the U.S. mortgage market, government-backed mortgage giants Fannie Mae and Freddie Mac announced Wednesday they will integrate VantageScore 4.0 into their loan evaluation processes. This modernization, championed by the Federal Housing Finance Agency (FHFA), heralds a new era for prospective homebuyers, particularly those historically underserved by traditional credit models, and carries significant implications for lenders, investors, and the broader housing economy.
The core of this transformative change lies in VantageScore 4.0’s ability to incorporate alternative data, most notably rent and utility payment histories. For decades, FICO scores have been the industry standard, heavily reliant on credit card and loan repayment data. While effective for many, this system often overlooked individuals who consistently paid rent and utilities on time but had limited or no traditional credit accounts – a demographic disproportionately represented by younger generations, minorities, and low-to-moderate income earners. FHFA Director William Pulte underscored this point, stating, “If you paid your rent for 10 years, that should be factored into your credit score.”
The initial rollout will be phased, commencing with a select group of approved lenders. This deliberate approach allows for operational adjustments and data validation before a wider implementation. During this transitional period, lenders will retain the flexibility to choose between the new VantageScore 4.0 and established FICO scores. This dual-track system offers a crucial period for market participants to adapt to the new credit evaluation landscape, assess its predictive capabilities, and manage potential shifts in their risk profiles.
“It is only thanks to President Trump’s landslide victory and leadership that we finally broke the gridlock to do this — what’s right for the American people over Washington’s special interest,” FHFA Director William Pulte said at a press conference Wednesday, attributing the breakthrough to political will. “Fannie and Freddie, as I said, are ready to immediately start working with approved lenders to accept VantageScore loans.” This political impetus highlights the long-standing debate over credit access and equity within the housing finance system, finally culminating in a concrete policy shift.
Single family homes line the streets of Thousand Oaks, Calif., April 2, 2026. ( Kevin Carter/Getty Images)
Freddie Mac has already begun pilot testing the new model, taking delivery of approximately $10 million in loans evaluated using VantageScore, with plans for securitization. This early testing phase is critical for demonstrating the model’s efficacy and for preparing the securitization markets for new types of underlying loan pools. The ability to bundle and sell these mortgages as mortgage-backed securities (MBS) is foundational to the liquidity of the U.S. housing finance system. Investors in MBS will be closely scrutinizing the performance of these new loan cohorts, assessing their default risk profiles and overall credit quality compared to traditionally underwritten loans.
Pulte’s estimate that this change could affect “tens of millions” of Americans is not an exaggeration. This expansion of eligible borrowers holds the potential to significantly broaden the addressable market for mortgage lenders. For first-time homebuyers, young professionals, and immigrant communities who often prioritize rental payments over establishing extensive traditional credit, this policy could be a game-changer, fostering wealth creation through homeownership that was previously out of reach. While rising interest rates and high home prices remain significant barriers, the ability to qualify for a mortgage based on a more holistic financial footprint removes one critical hurdle.
A person hands over a house key to another individual. (iStock)
The modernization effort is not exclusive to VantageScore. A second updated model, FICO Score 10T, is also slated for introduction. FICO 10T also integrates both positive and negative rental payment history when reported to credit bureaus, indicating a broader industry recognition of the value of alternative data. This dual adoption signifies a fundamental recalibration of how creditworthiness is assessed, moving towards a more inclusive and potentially more accurate reflection of an individual’s financial responsibility.
Jake Williamson, executive vice president and head of single-family at Fannie Mae, articulated the rationale behind the shift: “By incorporating newer models with more predictive power, we can support sustainable access to homeownership and keep safety, soundness and operational readiness at the center.” This statement highlights the GSEs’ dual mandate: promoting broad access to housing while maintaining the stability and safety of the housing finance system. The validation of these new models over years of extensive testing by federal regulators since 2022 underscores a commitment to risk management alongside expanded access.
A for sale sign displayed in front of a single-family home. (iStock )
The adoption of VantageScore 4.0 and FICO 10T represents the culmination of years of advocacy and technological development. Pulte’s own signaling of the shift last year on social media, noting that “credit history will no longer just include credit cards and loans,” foreshadowed this pivotal moment. The implications extend beyond just individual borrowers; they touch upon the competitive dynamics of the credit scoring industry, the operational workflows of thousands of lenders, and the risk management frameworks of the GSEs themselves. Lenders will need to invest in new underwriting technologies and training, while credit bureaus will likely see an increased demand for incorporating rent and utility payment data from landlords and service providers.
Market Impact:
The introduction of VantageScore 4.0 and FICO 10T by Fannie Mae and Freddie Mac is set to reverberate across the housing and financial markets. In the short term, mortgage lenders will face operational adjustments, including system upgrades and staff training, to accommodate the new scoring models. This could lead to a temporary increase in origination costs but will be quickly offset by access to a significantly expanded pool of potential borrowers, intensifying competition for market share. For the housing market itself, while this policy won’t directly lower home prices or interest rates, it will likely contribute to a gradual increase in effective demand, particularly among first-time and underserved buyers. This added demand, in a supply-constrained environment, could exert moderate upward pressure on home values over the long run, particularly in entry-level segments. Investors in mortgage-backed securities (MBS) will closely monitor the performance of loans underwritten with these new models to assess their credit quality and risk characteristics, potentially leading to adjustments in MBS pricing and demand as data emerges. In the long term, this move fosters greater financial inclusion, promoting wealth building through homeownership for a broader segment of the population, which can have positive knock-on effects for consumer spending and broader economic stability, while simultaneously pushing the credit scoring industry towards continuous innovation and more nuanced risk assessment.
FOX Business’ Daniella Genovese contributed to this report.