Fannie Mae, Freddie Mac adding a dose of competition to FICO credit scoring – San Bernardino Sun

Exactly 30 years ago, Fannie Mae and Freddie Mac adopted credit reports and their scores from FICO as a basis for mortgage credit decisions (approval or denial) and risk-based loan pricing.

That FICO credit scoring monopoly is about to end after a July 8 announcement from Bill Pulte, director of the Federal Housing Finance Agency (the agencies’ conservator and regulator), allowing the mortgage giants to also use VantageScore.

“Effective today, to increase competition to the credit score ecosystem and consistent with President Trump’s landslide mandate to lower costs, Fannie and Freddie will ALLOW lenders to use VantageScore 4.0,” Pulte posted on X, formerly Twitter.

It’s a long time coming. The bipartisan Credit Score Competition Act was signed into law in 2018. Five FHFA directors later, Pulte moved forward with implementation.

When will these changes take place? Pulte didn’t provide a timeline, but a VantageScore representative said “soon” during a webinar I watched. Industry insiders expect it will take time to update all the guidelines.

VantageScore claims 2.7 million more mortgages will be generated in the market due to its model. The distinctions it claims are that it includes rent, utilities and telecom payments (which FICO does not include).

VantageScore also removes non-predictive data like medical collections, according to its webinar.

“VantageScores are more forgiving. Paid collections and unpaid collections are ignored,” said Mindy Leisure, director of credit education at Advantage Credit. “FICO, other than medical bills, weighs paid collections.”

Full disclosure: My firm does business with Advantage Credit.

Both scoring systems range from a low of 300 to a high of 850, according to John Ulzheimer, president of The Ulzheimer Group, a credit expert firm.

Below are the vague distinctions between FICO’s “weighing” and VantageScores’ levels of influence.

Weighted FICO scores are calculated using five information categories from your credit report:

—Payment history (35%)

—Amount owed (30%)

—Length of your credit history (15%)

—Mix of your credit accounts (10%)

—New credit accounts (10%)

VantageScore says it’s using five categories of information from credit reports. Instead of weighing, it describes a certain level of influence:

—Payment history (extremely influential)

—Total credit usage (highly influential)

—Credit mix and experience (highly influential)

—New accounts opened (moderately influential)

—Balance and available credit (less influential)

Fannie Mae and Freddie Mac are likely to adjust rates and points since these systems have different weightings. Industry jargon calls this Loan Level Pricing Adjustments or LLPAs.

We’ll note that just Tuesday, a judge in Texas removed a Biden rule through the Consumer Financial Protection Bureau that would have removed medical debt from credit reports. U.S. District Court Judge Sean Jordan cited the Fair Credit Reporting Act and said the CFPB is not allowed to remove medical debt from credit reports, per the Fair Credit Reporting Act.

Pricing new credit reports

For now, there are many questions about how the VantageScore system will work, including how much it will charge for its scores. A spokesperson declined to answer this week.

How much does FICO charge? The cost to industry mortgage originators in 2024 was $3.50 for each score. Each borrower receives three FICO scores — one from each of the three credit bureaus. FICO score prices soared to $4.95 each in 2025 (a 41% increase), according to Leisure. So that’s $15 for a consumer to get three credit reports.

Credit score fees are just part of the price to run credit. There is also the tri-merged credit report required by Fannie Mae and Freddie Mac. For example, a tri-merged credit report at my shop costs the consumer $94.

I’ll note that credit reports are not transferable so, borrowers can spend hundreds of dollars paying these credit report fees as they shop for a mortgage. It’s not uncommon for lenders to cover the credit report fee as a cost of doing business.

My hunch says some consumers will get hit with higher credit report/credit score charges from lenders, not lower costs, and with no consequential benefit.

In his FAQs on X, Pulte wrote in part: To promote robust competition and provide further flexibility for consumers and lenders, the Enterprises (F&F) will allow lenders to determine which credit score model to use on each loan they deliver.

In other words, they can pull both a VantageScore and a FICO score to see which one might increase the score for better consumer pricing. Remember that a failing score is 619 and a passing one 620. Yes, this could ultimately benefit some mortgage shoppers, even though the costs of the second credit report and scores are likely to be passed on to the consumer.

You cannot append a FICO score to a VantageScore credit report and visa-versa, according to Leisure. This means you must run another credit report. That means Transunion, Equifax and Experian get to double dip on credit report charges.

As an aside, FICO is a standalone company. VantageScore is owned by the three major credit bureaus Experian, Equifax and TransUnion.

One consumer advocate said the addition of VantageScore would only muddy the waters for borrowers.

In an interview with USA Today, Chi Chi Wu, director of consumer reporting and data advocacy at the National Consumer Law Center, said VantageScore is an extension of a credit score monopoly.

“The big three credit bureaus are basically a functional monopoly,” Wu said. “If you want a mortgage, you have to pull all three reports. You have no choice. They created VantageScore to try to drive FICO out of the market because they want the whole market. FICO is the only independent actor.”

What do the FICO folks think about this? In part: “The Federal Housing Finance Agency’s interim “lender choice” policy introduces a dangerous precedent that increases adverse selection risk that will raise prices for consumers. Further, it inexplicably favors a less predictive credit score that will undermine the safety and soundness of the enterprises and their counterparts, and damage liquidity in the $12 trillion mortgage industry.”

The FHFA, Fannie Mae and Freddie Mac did not respond to requests for comment.

Freddie Mac rate news

The 30-year fixed rate averaged 6.75%, 3 basis points higher than last week. The 15-year fixed rate averaged 5.92%, 6 basis points higher than last week.