The Federal Housing Finance Agency (FHFA) published a list of clarifications regarding changes to credit score model requirements for Fannie Mae and Freddie Mac through the agency’s new “lender choice” policy.
Lenders will be allowed to choose to report credit scores from either the Classic FICO model or the VantageScore 4.0 model when delivering loans to the government-sponsored enterprises (GSEs). However, lenders will not be permitted to report scores from both models for a single loan, according to an FHFA press release published by FHFA Director Bill Pulte on X (formerly Twitter).
This policy update is part of the FHFA’s effort to modernize credit scoring and reporting, as mandated by the Credit Score Competition Act of 2018, which requires the agency to develop a process for evaluating and approving new credit score models.
FHFA approved VantageScore 4.0 and FICO 10T in 2022, but only Classic FICO and VantageScore 4.0 are currently being implemented, according to the release. These models incorporate broader financial data, including rent and utility payments, and aim to more accurately assess borrower risk.
To minimize disruption, the FHFA said it is not changing existing tri-merge or bi-merge credit reporting requirements at this time. Lenders will be able to select different score models across different loans. The agency believes this will encourage market competition while maintaining loan-level consistency.
The FHFA has made resources available to help with implementation, including historical VantageScore 4.0 data released in July 2024 to help stakeholders evaluate model performance. The GSEs plan to continue providing guidance through implementation websites and updates to the GSEs’ selling guide.
These changes will take effect once system readiness is confirmed. Until then, current policies remain in place. FHFA indicated that further changes could be pursued in the future to promote innovation, consumer benefit and enhanced safety and soundness.