Fannie Mae and Freddie Mac to Incorporate Rent and Utility Payments in Credit Scores

The Federal Housing Finance Agency announced on Wednesday that Fannie Mae and Freddie Mac will update their credit scoring rules to include histories of on-time rent and utility payments. This change adds new guidelines to Fannie Mae’s Selling Guide, enabling lenders to use such payment data when assessing borrower creditworthiness.

Officials stated that individuals who pay rent on time are more likely to pay mortgages on time, noting that the housing system has ignored this for decades.

Last year, officials announced that Fannie Mae and Freddie Mac would permit the use of VantageScore ratings alongside or instead of traditional FICO 10T scores. VantageScore incorporates rental and utility payment history reported to Equifax, Experian, or TransUnion, while FICO 10T considers both positive and negative rental payment history.

Since a pilot program began, Freddie Mac has accepted $10 million in loans and plans to securitize them soon. Officials estimated the change could assist tens of millions of prospective homebuyers.

Officials announced that the Federal Housing Administration will allow VantageScore 4.0 and FICO 10T for underwriting FHA-insured mortgages. The move expands access to homeownership for creditworthy borrowers overlooked by older systems and targets younger Americans with thin credit histories.

FICO supported the announcement in a statement, and Isaac Boltansky, head of public policy at PennyMac Financial Services, also praised the move.

and Modernization Efforts

Officials indicated that allowing VantageScore encourages competition, potentially lowering consumer costs. The change addresses challenges for workers like freelancers and gig workers with reliable cash flow but thin credit files, amid a housing market short millions of units, where the average first-time homebuyer is 40 years old, according to National Association of Realtors estimates.

Separately, officials discussed ending the conservatorship of Fannie Mae and Freddie Mac, with lawmakers working on a bill and the administration considering an initial public offering valued at $500 billion or more combined, involving a sale of 5% to 15% of stock.