Fannie Mae and Freddie Mac will now accept a competing credit score model alongside the long-dominant FICO score. The change marks one of the most significant shifts in mortgage underwriting in decades. It affects how millions of home loans are evaluated each year.
The Trump administration supports the move. Officials say added competition will lower costs for borrowers. Lenders largely share that view. A rival model could reduce fees tied to credit reporting.
The new model comes from VantageScore, a joint venture of the three major credit bureaus. It uses different formulas than FICO to weigh payment history and debt. Supporters say it scores more consumers accurately, especially those with thin credit files.
Not everyone welcomes the change. Some housing experts warn of underwriting risks. They argue that unfamiliar scoring models could mask borrower defaults. Others question whether the shift will truly lower costs.
Fannie and Freddie back most U.S. mortgages. Their acceptance of a second score reshapes the market overnight. Lenders must now decide which model to use and when. That choice carries real financial consequences.
FICO has dominated mortgage scoring for decades. Its monopoly gave the company strong pricing power. The new competition may pressure FICO to cut fees. That could save borrowers money on closing costs.
The transition will take time. Lenders need to update their systems and test the new model. Regulators will monitor early results for signs of trouble. Borrowers may see little change at first, but the shift is underway.
