For many of us, buying a home is the largest purchase we will ever make and we couldn’t do it without a mortgage. The type of mortgages and rates available to home buyers are directly affected by credit scores. The credit scoring model used to determine those scores is of great importance. 

What Credit Score Competition Means for Mortgage Lending

For many years, Fannie Mae and Freddie Mac, the government-sponsored enterprises (GSEs) responsible for purchasing and securitizing the bulk of mortgages in the U.S., have been required to rely solely on one brand of credit scoring models. Credit score competition is coming to the mortgage industry. Thanks to new federal law and recent rulings by the Federal Housing Finance Administration (FHFA), we now have the potential to expand sustainable homeownership opportunities to millions of additional Americans who are currently disadvantaged by mandated credit scoring models. 

How Competition Will Affect the Mortgage Market

The way we use credit has changed but some credit scoring models have not adapted to these shifting behaviors. The model competition will result in more accurate, reliable, inclusive, and updated mortgage credit scores. 

With credit score competition:

  • Millions more creditworthy consumers may be eligible for mortgages.
  • Potential first-time homeowners will be more fairly assessed. Why Competition is Important.

VantageScore and other credit score model developers may now have an opportunity to bring more predictive and inclusive credit scores to the mortgage marketplace.

  • Approximately 40 million more consumers can be scored using VantageScore models, 16% of whom are of African- or Hispanic-American descent (see full breakdown below).
  • VantageScore models account for shifting consumer demographics and behaviors, enabling lenders to score more than 10 million borrowers with a credit score of 620 and above (often the minimum credit score required for mortgages), borrowers who cannot obtain scores with the current models used for mortgages (see full breakdown below).
  • 21% of Millennials have “thin files,” meaning they have fewer than three active credit accounts, something traditional models penalize. Millennials are not necessarily less creditworthy but instead less inclined to use credit, a behavior that is unfairly punished by traditional models.

A breakdown of these consumers is as follows:

Emerging Borrower/ Young File Young to credit Consumers who have only credit accounts that are less than six months in age
Dormant Infrequent or rare users of credit Consumers who haven’t had an update/reporting on their credit files in the past six months but have had updates more than six months ago
No Trades Have only external collections, public records, and inquiries on their file Consumers who have no credit accounts but are scored based on external collections and public records on their file


Demographic breakdown of 40 million “unscorable” consumers using conventional models:

2018 Unscoreables – All Scores 2018 Unscoreables – All Scores 620 and above
Total 40 million 10.06 million
Black and Hispanic 12.2 million 2.4 million
Asian/Pacific Islander 1.6 million <1 million
White 25.7 million 7 million
Native American 335,000 66,000