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The regulator’s decision to allow a major change in the way mortgages take on is to meet mixed receptions from housing and finance professionals.
“Today, Fannie and Freddie will allow lenders to use the Vantage 4.0 score to increase competition with the credit score ecosystem and to match President Trump’s landslide mandate to reduce costs.”
FHFA oversees Fannie Mae and Freddie Mac, two giant government-sponsored companies that guarantee almost half of US mortgage debt. Fannie and Freddie buy loans from banks and other financial institutions, so changing the process is important to lenders across the country and the borrowers they serve.
In this case, Pulte was referring to VantagesCore, the company that provides credit scores. A numerical expression of the likelihood that a borrower will pay off the loan. Lenders who offer mortgages with the intention of selling to Fannie or Freddie have the option to use VantagesCore or to evaluate borrowers to continue using their competitor, FICO.
“By allowing FHFA to choose the credit score model that FHFA will use when delivering loans to Fannie Mae and Freddie Mac, it will help us achieve our additional competitive goals in the credit score space and reduce consumer costs correctly.
“We need more competition between credit bureaus and an end to monopoly practices to lower prices and improve accuracy,” Sharon Cornelissen, housing director for the United States Federation of Progressive Consumers, told USA Today in an email. “Coach Pulte’s actions are a step in the right direction and we hope he continues to work on reducing the costs of closing consumers and expanding access to mortgages.”
However, some consumer advocates believe that the introduction of Vantage Scores into the mortgage space will actually reduce competition by integrating the industry’s shares more firmly at the hands of the three credit bureaus that own the company, Transunion, Experian and Equifax.
“The Big Three Credit Bureau is essentially a functional monopoly,” said Chi Chiu, director of consumer reporting and data advocacy at the National Center for Consumer Law. “If you need a mortgage, you have to draw all three reports. There’s no choice. They created VantagesCore to drive FICO out of the market because they want the whole market. FICO is the only independent actor.”
Ingmar Goldson, a Maryland-based consumer attorney, reflects those beliefs. “ Given that VantaseScore is owned by three main credit bureaus, I remain skeptical of claims from Fannie, Freddie, or the station itself.
Anthony Hutchinson, head of VantagesCore’s spokesman, told USA Today that the company’s model, where consumer information provides creditworthiness information to lenders, is more “overall” than FICO.
Among other things, Hutchinson said the VantagesCore model can blend consumer information over a period of time. This “trend” approach is more useful than looking at the consumer at once, as it can show whether a person’s financial health is improving or weakening.
VantagesCore also argues that the 33 million Americans who are “uncredible” – that is, they don’t have credit scores at all – and that a more modern approach to collecting data is better at scoring.
But Wu says she doubts those numbers. In fact, the Consumer Financial Protection Agency recently published a study suggesting that the number of invisible credits is only about a tenth, or about 2.7 million. Wu also points out that FICO incorporates some of the more dynamic credit attributes.
A FICO spokesman emailed us in response to a request for comment from the USA.
“FICO welcomes the competition in a level playing field for credit score providers. We compete fiercely in all US consumer credit markets. FICO scores are freely chosen by lenders, investors and other market participants. Non-fit.”
Opening credit scoring space to real competition and easing the path to homeownership for more Americans — will also receive bipartisan support in biased Washington. Pulte’s decision comes from a law introduced years ago by Republican Sen. Tim Scott (S.C.) and Democrat Sen. Mark Warner (Va.), Hutchinson points out.
The Credit Score Competition Act, the Act on 2018, was signed into law as part of the Economic Growth, Regulatory Relief and Consumer Protection, but it took FHFA several years to decide how to implement it. Senator Scott was one of the lawmakers who encouraged faster action on that front in 2023.
Wu believes that a slower approach is the best given the number of stakeholders involved in such a big transition. “I think it’s Bonker to change the well-thought-out decisions that were the result of a lot of processes with arbitrary tweets,” she said.
Aside from concerns about industry background, the existence of Vantagescore may not make a difference to consumers in terms of immediate savings. When asked about how little one of the scores was compared to the FICO score, the company biased the question to the Credit Bureau. equifax and Experian did not respond immediately to requests for comment.
CFA Cornelissen admits savings are minor despite support for Step. “A few dozen dollars,” she said.
(This story was updated to update the headlines.)
