A new industry study suggests mortgage lenders may have a path to lower costs and expand their borrower pool, as pressure builds around rising credit score fees.
Research released Monday by VantageScore found that lenders using VantageScore 4.0 in pre-screening and pre-qualification can improve decision accuracy, reduce unnecessary underwriting work, and identify more creditworthy first-time buyers.
The findings come as industry groups, including the Community Home Lenders of America (CHLA), are pushing for faster adoption of VantageScore as an alternative to FICO, citing sharp increases in credit score costs.
Fewer False Positives, More Viable Borrowers
According to the study, using VantageScore 4.0 earlier in the origination process helps lenders better distinguish between high- and low-risk applicants before full underwriting.
That can reduce unqualified files entering the pipeline while surfacing borrowers who may be overlooked by traditional models, particularly those with thin or nontraditional credit profiles. The result is a more efficient origination process with fewer misallocated resources.
The study estimates lenders and borrowers could save nearly $1 billion in the first year of full adoption, driven by improved screening and reduced processing of loans that do not close.
The cost question has taken on new urgency across the industry.
Credit bureaus have begun cutting pricing on VantageScore 4.0 to drive adoption and increase competition, even as separate industry analysis suggests that lower credit score pricing alone may not significantly reduce borrower costs due to the continued reliance on tri-merge credit reports.
CHLA recently reported that the average cost to pull a tri-merge credit report has climbed to roughly $540 per file, up sharply from just a few years ago, increasing pressure on lenders and borrowers alike.
Expanding Access Without Loosening Credit
VantageScore said its 4.0 model incorporates trended credit data and broader consumer behavior, helping identify borrowers with limited credit histories who may still represent acceptable risk.
That could be particularly relevant for first-time buyers, who often face higher barriers to entry and may not fit traditional credit profiles.
The study argues lenders can expand access without loosening underwriting standards by improving how creditworthiness is assessed earlier in the process.
What It Means For LOs
For originators, the implications center on pipeline efficiency and pull-through.
Using more predictive scoring models in pre-screening can reduce time spent on unqualified borrowers while increasing conversion from viable applicants.
The study positions VantageScore adoption as both a cost-control lever and a growth opportunity, particularly as lenders navigate margin pressure and a constrained pool of qualified borrowers.
As credit costs rise and competition remains limited, the question for lenders is shifting from whether to adopt alternative models to how quickly they can be integrated into the origination process.
