VantageScore, FICO 10T Include Rental History, Utility Payments for Prospective Homebuyers
U.S. Federal Housing Director William J. Pulte, during an April 22 news conference on new rules for how creditworthiness will be calculated, said consideration will be given to the rental payment history of a potential homebuyer who is seeking a federally backed mortgage.
“Today is a great day for American homebuyers,” Pulte said in introducing the much-anticipated change.
“Effective immediately, Fannie Mae and Freddie Mac are accepting new, modern credit scores that give American homebuyers the credit they deserve for paying their rent,” he said. “If you pay on time, you’re more likely to pay your mortgage on time.”
He said the housing system for decades has “ignored the simple fact” that timely rent payments, particularly for lengthy durations, are a meaningful indicator of credit worthiness for a home mortgage.
“This is a very big deal,” Pulte said. “Credit scores help set mortgage rates and access to home ownership. Lenders use a credit score to determine who gets a mortgage… Fannie and Freddie use it to decide what they will pay for a loan, and investors use it to price the mortgage-backed securities that determine rates.”
Utility payments are also included in VantageScore, and are in the adoption phase for the competing product, FICO 10T.
Twenty-one lenders are in the pool to offer federally backed mortgages under the new program, all of which will be made available through Fannie Mae and Freddie Mac, Pulte said. More lenders are being added to the pool, and the opportunity is open to other lenders who are interested in expanded federal backing.
“We are now in business to make home buying more affordable while being safe and smart,” Pulte said.
Pulte said that he and HUD Secretary Scott Turner held the press conference to spread the word through media about the change, and they have also updated the federal guidelines on how credit will be considered. Already, he said, $10 million in loan activity is documented within the program through Freddie Mac.
“Fannie Mae is underway too,” he said.
Pulte and Turner agreed that in no way does the scoring system change lend a preference toward a specific product or program. Rather, it opens the market for initial and potential products and programs that will benefit the consumer in the home-buying space.
“America was built on competition, as we all know,” Turner said. “Competition stops complacency. Complacency will rob you of your destiny. And it shakes up the status quo, competition does.
“Our announcement today will allow competition between different credit scoring models,” he said. “So we can make housing more affordable and more available for prospective home owners.”
Industry Response to Credit Score Criteria
“MHI supports efforts to facilitate a more competitive market for credit reports and scores, while mindful of the need to preserve secondary market liquidity and investor confidence, which drive the cost and availability of credit for homeowners,” Lesli Gooch, the CEO of the Manufactured Housing Institute, said. “We applaud Secretary Turner and Director Pulte for their focus on improving housing affordability and look forward to continuing our collaboration with them on this and other critical initiatives with that shared goal.”
Cody Pearce is co-CEO of Triad Financial Services, a national lender for manufactured homes.
“At Triad Financial Services, we strongly support the move to modern credit models like VantageScore and FICO 10T that recognize real-world payment behavior,” Pearce said. “For too long, responsible consumers who consistently pay their rent and utilities on time have been overlooked by traditional scoring systems. This change is a meaningful step toward expanding access to homeownership in a responsible way, rewarding true creditworthiness while maintaining sound lending standards. It’s smart policy, and more importantly, it’s the right thing for American homebuyers.”
Ben Halliday, co-founder and CEO of the lending platform Zippy, said he feels the change is a thoughtful step toward giving borrowers and lenders a more complete and accurate view of credit risk and creditworthiness.
“Zippy has considered rental payments in its origination criteria for years, and the results are positive,” Halliday said. “The next major unlock to affordability is pairing this smarter credit framework with lower-cost, high-value housing, and manufactured housing already delivers that at scale. We look forward to continuing to work with regulators and industry partners to expand the supply of manufactured housing across the country.”
Walden Buttram is chief operating officer for 21st Mortgage Corporation.
“21st Mortgage applauds the announcement to accept modern credit models and the focus on increasing homeownership without compromising lending standards,” Buttram said. “Consumers, especially first-time home buyers, and the housing industry will certainly benefit from credit score models that incorporate verifiable rental and utility history.”
Editor’s note: This post is being updated as more information becomes available.
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