Just days after Fannie Mae and Freddie Mac released historical mortgage performance data to help lenders evaluate the industry's next generation of credit scoring models, VantageScore is making the case that its model could dramatically expand the mortgage market.
In a white paper released Tuesday, the company said VantageScore 4.0 can score more than five million additional creditworthy borrowers than FICO Score 10T, representing what it estimates is up to $1 trillion in additional mortgage origination opportunity for lenders.
The report, More Data Means More Creditworthy Mortgages: How VantageScore 4.0 Enables Lenders to Serve Millions More Creditworthy Borrowers than FICO 10T, argues the company's broader use of traditional and alternative credit data allows it to score consumers who have historically been excluded under legacy FICO mortgage scoring criteria while maintaining comparable credit risk.
VantageScore attributes that broader reach to its use of machine learning, trended credit data, and alternative data — including reported rental, telecom, and utility payment histories. The company says VantageScore 4.0 leverages "400% more data" than traditional FICO mortgage scoring models when assessing consumers with limited or inactive credit histories.
The study follows last week's release of loan-level historical performance datasets by Fannie Mae and Freddie Mac, a key milestone in the Federal Housing Finance Agency's transition to allowing both VantageScore 4.0 and FICO Score 10T for loans sold to the government-sponsored enterprises. The datasets are intended to help lenders, investors, and technology providers evaluate both scoring models ahead of broader implementation.
According to VantageScore, those historical datasets include only mortgages previously underwritten using legacy FICO scoring requirements, meaning borrowers who could not receive a FICO mortgage score under those standards are absent from the data.
The expanded population includes consumers who are new to credit, borrowers with inactive or "dormant" credit histories, and consumers without traditional credit tradelines. For the mortgage market, the company says that translates into more than 5 million additional creditworthy borrowers, including veterans returning from active duty, farmers with seasonal borrowing patterns, and consumers who have not recently used traditional credit.
"Millions of consumers remain forgotten by FICO Classic and FICO 10T credit scoring models, not because they lack creditworthiness, but because FICO's legacy systems rely on narrow, obsolete criteria," said Dr. Andrada Pacheco, executive vice president and chief data scientist at VantageScore.
The study also argues the opportunity extends beyond first-time buyers. VantageScore says many newly scoreable consumers already have established credit histories but fall outside legacy mortgage scoring models because they have not recently used traditional credit products.
"Our findings show that lenders do not have to choose between expanding access to creditworthy consumers versus compromising risk prediction. VantageScore 4.0 delivers both increased access to creditworthy mortgage consumers while maintaining risk safety and soundness."
According to the study, borrowers who are newly scored by VantageScore 4.0 demonstrate a risk profile comparable to consumers who have traditionally qualified for mortgages using legacy FICO scoring models.
Key Findings
According to VantageScore, the study found:
- More than five million additional consumers could receive mortgage credit scores under VantageScore 4.0 compared with FICO Score 10T.
- Those borrowers represent up to $1 trillion in potential mortgage origination volume.
- Consumers newly scored under VantageScore 4.0 exhibit credit risk comparable to borrowers who have historically qualified for mortgages under legacy FICO scoring models.
Why It Matters
For MLOs, the study shifts the conversation around the GSE credit score transition from implementation to production.
NMP has previously reported on the FHFA's approval of both VantageScore 4.0 and FICO Score 10T, the release of the new GSE historical loan performance datasets, and MISMO's implementation guide supporting both scoring models. VantageScore's latest study builds on that discussion by arguing the industry's opportunity extends beyond adopting a second approved credit score.
The company contends its model can safely identify millions of additional mortgage-ready borrowers who would have gone unscored under legacy mortgage credit scoring standards, particularly consumers with thin, inactive, or nontraditional credit histories. If that proves true in practice, lenders could expand their addressable borrower pool without, according to VantageScore's analysis, taking on materially greater credit risk.
