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A Leap into a Fairer Credit Future: GSEs Adopt VantageScore 4.0 and FICO 10T

The integration of VantageScore 4.0 and FICO 10T by the GSEs is a powerful stride towards a more advanced credit scoring system. Harnessing more expansive datasets responsibly and equitably can lead to a broader understanding of creditworthiness


Mike Baer

Senior Consultant


The landscape of credit scoring is shifting. Last year, the Federal Housing Finance Agency (FHFA) mandated the adoption of the VantageScore 4.0 and FICO 10T models by the Government-Sponsored Enterprises (GSEs). This move is set to reshape the existing lending environment. The timeline for lenders to implement these new models and start reporting both scores on loans sold to the GSEs, however, remains fluid. Amidst ongoing discussions, the industry faces uncertainty, preparing for a transition period that will likely extend beyond initial expectations.

The reshaping brings to the forefront a more nuanced credit scoring system, stepping away from the traditional practice that relied on a narrower range of financial activities. The previous model often overlooked the complexity of financial behavior, creating a wall of financial exclusion for many consumers. The advent of VantageScore 4.0 and FICO 10T models aims to chip away this wall, introducing a more holistic and equitable approach.

FHFA Director Sandra Thompson, in remarks made last year, highlighted the benefits of these new models:

“The new models bring the benefits of innovation to the table in two ways:


​FICO 10T and VantageScore 4.0 both provide more accurate credit scores than Classic FICO. We believe the market, including investors, will be provided with an improved understanding of risk from not just one but two different credit score models.


FICO 10T and VantageScore 4.0 are more inclusive than Classic FICO. While the Enterprises have already taken steps to expand equitable access to credit, such as enhancements to their underwriting systems, both FICO 10T and VantageScore 4.0 factor in new payment histories for borrowers when available, such as rent, utilities and telecom payments.”

A More Inclusive Future

The adoption of VantageScore 4.0 and FICO 10T marks a significant step forward in creating a more inclusive housing market. These models are designed to provide a more comprehensive assessment of creditworthiness, going beyond traditional credit activities. VantageScore’s own analysis indicates that their model could significantly increase homeownership opportunities by scoring approximately 40 million more consumers than mainstream credit scoring models.2 This is accomplished by incorporating additional financial behavior, which is particularly beneficial for individuals who may not have traditional credit profiles but demonstrate financial responsibility through other means.


By recognizing a wider array of financial activities, VantageScore 4.0 and FICO 10T promise to open doors to homeownership for many who have been marginalized by the traditional credit system. This shift is not just about more accurate credit assessment; it's about fostering equity and inclusion in the housing market. The adoption of these models represents a hopeful future where more individuals can access the credit they need to secure homes, contributing to a more diverse and equitable society.

Implementation Challenges

These changes, however, come with their own set of challenges. GSEs and other lenders must restructure their underwriting processes and systems to accommodate these new models – an arduous process that requires both time and considerable resources.

While the FHFA hopes to “ease the transition complexity for stakeholders” by proposing a staggered approach, initially, major changes were proposed for implementation as early as the first quarter of 2024. This timeline sparked many industry participants, including the American Bankers Association (ABA), to express concerns over its feasibility. In acknowledgment, the FHFA signaled a willingness to revise the implementation date beyond what was originally proposed, reflecting a readiness to address the intricacies of this significant transition.


Another contentious item is the transition from tri-merge to bi-merge credit reports. This shift, moving from the median of three credit scores to the mean of two, has sparked debate among market participants. Concerns center around the potential for inconsistent credit evaluations and the impact on consumer experiences. Some fear that the bi-merge approach could lead to disparities in credit scoring, depending on which two bureaus’ reports are used. This uncertainty about the transition’s effect on both lenders and borrowers adds another layer of complexity to the already challenging implementation process.


Beyond these topics, there are several other high-level challenges that stakeholders must navigate:

  • Potential for Increased Borrower Costs: The introduction of new scoring models may lead to changes in lending rates and fees, directly impacting borrowers.

  • Implementation Costs: Organizations face substantial expenses as they update models and systems, a factor that could affect their operational budgets and service pricing.

  • Housing Program Participation: Questions arise about how other housing programs will integrate these changes and whether they will participate in the transition.

  • Operational Integration: There are concerns about how the two scoring models will function within the existing mortgage processes and whether they will align with lenders’ current systems.

  • Consumer Experience: The move to bi-merge reporting could result in disparate consumer experiences, depending on which credit reports are used.

As the industry grapples with these and other issues, the FHFA continues to engage with stakeholders through a public feedback forum, underscoring its commitment to a transparent and collaborative approach. Recognizing the complex nature of this transition, Potomac Point Group (PPG) created this helpful infographic to provide more information on the challenges facing implementation, particularly at the loan level.

What Does This Mean For You?

The shift towards these models, despite its inherent challenges, opens opportunities for a more inclusive lending environment. Your organization should prepare to adapt to these changes by staying informed, updating systems, investing in training staff, reviewing internal policies, engaging with vendors, and planning a robust communication strategy.

As we look ahead, the integration of VantageScore 4.0 and FICO 10T by the GSEs is a powerful stride towards a fairer, more advanced credit scoring system. Harnessing more expansive datasets responsibly and equitably can lead to a broader understanding of creditworthiness, fostering an inclusive and resilient future in housing finance.


To facilitate this evolution, Freddie Mac and Fannie Mae have released playbooks outlining the steps and considerations necessary to align with the forthcoming credit evaluation framework. These resources are invaluable for preparing your organization to meet the new requirements and to capitalize on the opportunities they present.


We encourage you to check out PPG’s previous update on the credit score model changes and join the conversation by directing your queries to our website or LinkedIn page. We welcome your engagement on this transformative journey in housing finance.

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