Fannie Mae And Freddie Mac Adopt Alternative Credit Scores

Fannie Mae and Freddie Mac are moving away from relying only on the old “Classic FICO” score and are adopting newer, more inclusive credit score models that can use rent, utilities, and telecom payment data when available.

What “alternative credit scores” means

• The Federal Housing Finance Agency (FHFA) has approved two newer models for use by Fannie Mae and Freddie Mac: FICO 10T and VantageScore 4.0.

• These models can incorporate additional data such as rent, utility, and phone bill payments (if those tradelines are in the credit report), not just traditional credit accounts like credit cards and auto loans.

• The goal is to make scores more accurate and more inclusive for borrowers with thinner or less traditional credit histories.

Current status and implementation

• FHFA validated and approved FICO 10T and VantageScore 4.0 for Enterprise use in October 2022, with a multi‑year implementation timeline.

• As an interim step, lenders selling loans to Fannie or Freddie may now choose to use either Classic FICO or VantageScore 4.0 in many cases, which introduces competition in mortgage credit scoring.

• The longer‑term plan is for lenders to deliver both FICO 10T and VantageScore 4.0 scores, when available, with each single‑family loan sold to the Enterprises.

Why FHFA, Fannie, and Freddie are doing this

• Newer models like FICO 10T and VantageScore 4.0 use “trended” data, looking at patterns in how balances and payments change over time, which improves default prediction compared with the older Classic FICO model.

• Incorporating rent and other recurring payments is expected to help “credit invisible” or thin‑file borrowers who pay regularly but have few traditional credit accounts.

• FHFA and independent analyses expect millions of additional creditworthy borrowers to become scoreable, potentially expanding access to mortgage credit while maintaining risk controls.

What this could mean for borrowers

• If you have consistent on‑time rent, utility, or phone payments that appear in your credit file, the newer models may give you a higher or more favorable score than Classic FICO would.

• More borrowers with limited traditional credit histories—such as younger consumers, some military members, and long‑time renters—could qualify for mortgages guaranteed by Fannie Mae and Freddie Mac.

• Lenders retain discretion: they may still set their own overlays and choose how quickly to adopt VantageScore 4.0 or, later, dual‑score requirements within FHFA’s framework.

If you tell me whether you’re a borrower, lender, or investor, I can outline the specific practical steps or impacts for your situation.