VantageScore has entered the mortgage market. How will this affect housing, affordability, and competition?

For nearly four decades, the credit score that determined whether Americans could achieve the dream of homeownership came from a single company: the Fair Isaac Corporation (FICO). But recent regulatory changes allowing use of the scoring model VantageScore 4.0 have finally brought competition to mortgage underwriting.

Mortgage underwriting: A brief explanation

Mortgage underwriting uses a variety of factors gleaned from an individual’s financial history to determine their eligibility to borrow funds when purchasing a home. These factors are aggregated through the three major credit bureaus: Equifax, Experian, and TransUnion. The bureaus collect and record financial data—such as credit card payment history, auto loans, medical debt, personal loans, total outstanding debt, and total debt usage as a share of available credit. FICO and VantageScore then translate this data into a score ranging from 300 to 850, which is used in conjunction with other factors (e.g., down payment amount, total loan value) to determine an individual’s ability to obtain a loan to purchase property and to establish their mortgage terms, including interest rates.

History of mortgage underwriting

Before FICO launched its credit-scoring model in the late 1980s, mortgage underwriting went through a slow, manual process with no uniformity among lenders. This meant slower and less transparent approvals (and denials) for would-be homeowners. It also meant Wall Street had a harder time evaluating mortgage-backed securities. This lack of information made it harder for the entire housing industry to spread out its risk. In 1995, Fannie Mae and Freddie Mac—the two government-sponsored enterprises (GSEs) that backstop the majority of the U.S. mortgage market—made FICO mandatory for underwriting loans. While this transformed the mortgage industry by standardizing credit scoring, it also effectively gave FICO a monopoly on credit scoring in an industry that covers trillions of dollars in loan originations each year.

Things began to change in 2006, when Equifax, Experian, and TransUnion jointly created VantageScore as an independently managed venture to build a competing scoring model. Its intent was not just to introduce competition, but also to fill in gaps identified in FICO’s methodology. VantageScore’s methodology was designed to produce more consistent results across credit data and to incorporate other meaningful markers of borrowing capacity, such as rental payment history. Amid legal battles (and spurred by regulatory capture), VantageScore spent the better part of two decades as a niche alternative used mainly by credit card issuers, auto lenders, and free consumer credit-monitoring sites.

Recent changes

FICO’s hold on the market has changed dramatically in recent years. Congress passed the Credit Score Competition Act as part of a broader regulatory relief package in 2018, directing the Federal Housing Finance Agency (FHFA) to build a formal process for validating alternative credit-score models for GSE use. In October 2022, FHFA announced its validation of two new models, VantageScore 4.0 and FICO’s newer 10T model, signaling that lenders would eventually be able to choose between FICO and VantageScore rather than defaulting to one vendor. FHFA also indicated its intent to move away from requiring all three bureau reports on every loan (the “tri-merge” system) toward a “bi-merge” model pulling from just two bureaus, which the agency argued would cut origination costs.

In April 2026, FHFA and the U.S. Department of Housing and Urban Development jointly announced that Fannie Mae and Freddie Mac would begin accepting VantageScore 4.0 through a program for approved lenders while continuing to prepare FICO 10T for eventual use.

On Sept. 3, Pulte posted on social media that “effective immediately,” Fannie and Freddie must approve every eligible lender to use VantageScore, citing the successful pilot program. The way he frames it, this will serve to end FICO’s monopoly.

Competitive advantages to introducing VantageScore

The economic case for introducing VantageScore into the mortgage market rests on two claims. The first is that a second validated model should reduce loan origination costs by breaking what many consider to be a FICO monopoly. A study by Deep Future Analytics models the scale of potential savings at more than $1 billion in 2027 alone. Credit score costs are embedded in the price of mortgage origination and either passed through to the borrower at closing or absorbed by the lender as a thinner margin. Either way, cheaper scoring should reduce the amount a homeowner actually pays. VantageScore has already been marketed at $0.99 per score compared to roughly $10 for FICO. This is almost certain to exert downward pressure on FICO, which current FHFA Director Bill Pulte states has raised its prices 1,800 percent since 2020.

The second claim concerns coverage rather than price. VantageScore’s model differs from FICO’s by permitting lower minimum credit history and by incorporating rent, telecom, and utility data. This allows VantageScore to score millions of consumers considered “unscorable” by classic FICO, thereby helping borrowers with thinner credit histories obtain better mortgage terms.

Lenders have reported seeing this occur in practice. Chief Growth Officer Desmond P. Smith of mortgage lender UWM—the first lender to incorporate VantageScore as part of the pilot program—conveyed two important points in a recent interview with Housing Wire. First, some borrowers who missed UWM’s FICO-based minimum qualified outright under VantageScore. Second, potential borrowers who qualified under both saw a high enough VantageScore to shrink their closing costs. One borrower saved more than $4,000 this way.

Conclusion The introduction of VantageScore as a competing model to FICO is long overdue. The decades-long delay underscores many bureaucratic issues, including regulatory capture, the manufactured stifling of competition, and adverse outcomes such as higher consumer costs, reduced transparency, and poorer mortgage market health.