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Fannie Mae and Freddie Mac to Accept VantageScore Credit Model Incorporating Rental Payment History
The government-sponsored enterprises will now accept mortgages using VantageScore models that incorporate on-time rental and utility payments, alongside or instead of FICO scores. The change, announced by FHFA Director William Pulte on April 22, could allow 7.7 million Americans to qualify for loans by boosting scores above 620.
May 9, 3:44 PM·2m read1 source
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Fannie Mae and Freddie Mac finalized a rule change last month that allows them to accept mortgages underwritten with a credit score model incorporating on-time rental payments. U.S. Federal Housing Finance Agency Director William Pulte announced on April 22 that the enterprises were expanding a pilot to let mortgage lenders use VantageScore ratings to assess borrower creditworthiness in addition to or instead of FICO scores.
7 million Americans to boost their credit score above 620. In a study VantageScore conducted on 600,000 people last year, about 10 percent of the 77 million credit-relevant renters in the country would benefit from updating the credit score, resulting in a score of at least 620 and making them mortgage-eligible under current GSE guidelines.
1 million households and $777 billion in new mortgage volume. 7 percent predictive lift. VantageScore’s model improves risk prediction by identifying up to 11 percent more defaults in the riskiest score ranges.
Young consumers’ average credit scores rise by 67 points when rental payment history is included. Some consumers see credit score boosts of as much as 100 points when rental payment history is included, said Rikard Bandebo, VantageScore Chief Economist. The model "allows borrowers to demonstrate responsible financial behavior that legacy credit scoring models currently overlook," Bandebo said.
Only about 13 percent of renters benefited from positive rental payment history in their credit reports last year. California, Colorado, and New York have enacted programs for rent reporting. Nine other states have considered legislation for rent reporting.
