Updated Credit Scoring Models Will Benefit Borrowers

October 24, 2022 — Press Release

New Model Will Improve Accuracy and Reduce Impact of Paid Collection Items and Medical Debt 

WASHINGTON – Today, the Federal Housing Finance Agency (FHFA) announced the validation and approval of both the FICO 10T credit score model and the VantageScore 4.0 credit score model for use by Fannie Mae and Freddie Mac. 

In response to the announcement, Chi Chi Wu, staff attorney at National Consumer Law Center (NCLC), said:

“We are glad that FHFA finally issued a decision to update the credit scoring models used by Fannie Mae and Freddie Mac. NCLC started asking FHFA to update the scoring models back in 2014. Kudos to Director Sandra Thompson for directing FHFA to issue this decision.

“Moving to the updated credit scoring models will help consumers because both FICO 10T and VantageScore 4.0 do not consider paid debt collection items. They also reduce the impact of unpaid medical debt. 

“We are also glad that FHFA chose the option of requiring both FICO 10T and VantageScore 4.0 to make this change. This avoids the ‘Lender Choice’ option that was really problematic , because it could have resulted in the Big Three credit bureaus driving FICO out and leaving only VantageScore, which is a company owned by the Big Three.

“Finally, we’re glad that FHFA has decided that Fannie Mae and Freddie Mac need only require two, rather than all three, credit reports from the Big Three credit bureaus. This decision will help promote competition that will benefit consumers.”

Related Resources:

• National Mortgage News “Opinion: Prevent the Uber effect on credit scoring” by Chi Chi Wu, Mar. 15, 2022
• Comments Regarding Validation and Approval of Credit Score Models, May 21, 2019
• Comments to the FHFA Regarding Updating the Credit Scoring Models Used by Fannie Mae and Freddie Mac, Mar. 30, 2018
• Letter to FHFA on Fannie Mae and Freddie Mac Policies Regarding Disputed Items on Credit Reports, Nov. 14, 2014