Written by: Internal Analysis & Opinion Writers
The decades-old rivalry between credit scoring titans FICO and VantageScore has escalated dramatically, especially on the heels of a recent policy shift by the Federal Housing Finance Agency (FHFA). Mortgage lenders can now submit applications to Fannie Mae and Freddie Mac using either VantageScore 4.0 or the tried-and-tested Classic FICO model, triggering heated competition and scrutiny.
FHFA Director Bill Pulte made waves with a July 8 announcement on X, stating the move was designed to “increase competition in the credit score ecosystem.” He noted that VantageScore’s inclusion of rent-payment data could open doors for “millions of forgotten Americans” who previously struggled to qualify for mortgages.
Industry reactions have varied. Shannon McGahn of the National Association of Realtors hailed the change as “a major step toward a more accurate and equitable underwriting process.” The Mortgage Bankers Association, American Bankers Association, Housing Policy Council, and Structured Finance Association collectively praised the policy shift—but urged a careful rollout to address unanswered questions about implementation.
However, not everyone is convinced. The Wall Street Journal’s editorial board warned that expanding effective lending tools could also lead to the approval of riskier borrowers. FICO CEO Will Lansing echoed concerns—arguing that VantageScore’s model, while more “inclusive,” asks for less borrower history, potentially jeopardizing system stability.
FICO didn’t just push back verbally—they backed their claims with data. Their recent white paper asserts that FICO Score 10T outperforms VantageScore 4.0 in predicting mortgage defaults. The report even cited an independent Urban Institute study which found FICO 10T was five times better at identifying loan losses relative to Classic FICO.
VantageScore Labs answered with its own research, claiming VantageScore 4.0 “demonstrates substantially superior performance over the incumbent Classic FICO model.” The company noted machine-learning techniques and alternative data usage—rent, utilities, telecoms—helped it capture more defaults in high-risk score populations and uncovered roughly five million additional creditworthy borrowers.
Experts are urging caution in response to conflicting studies. Eric Kaplan of the Milken Institute emphasized rigorous validation before new scoring models are widely adopted. “No score should enter the ecosystem until the market is comfortable with its accuracy, risk performance, and legal and operational implications,” he wrote.
Some smaller lenders are pushing the competitive envelope further. The Community Home Lenders of America proposed that Fannie and Freddie create their own scoring subsidiaries, which could later be spun off, resulting in a landscape with multiple independent “umpires” measuring creditworthiness. The organization also criticized FICO’s fee structure and predicted further rate increases.
Amidst the back-and-forth, lenders are left adapting underwriting and risk toolkits. Many are adjusting pricing matrices and automated systems to account for differences in score bands and data segments. Training teams and ensuring disclosures accurately reflect which models lenders use have become top priorities.
The bigger question remains: how will the market balance innovation with stability? With new scoring models offering broader access, there’s potential to extend credit to underserved borrowers. But adopting unproven tools without sufficient oversight could bring unintended downstream risks.
As Fannie Mae and Freddie Mac begin accepting both models, the real-world test begins. Beyond internal lender adjustments, performance monitoring will be critical. Loan outcomes tied to model usage must be tracked over time to ensure defaults, delinquencies, and loss calculations align with expectations.
This credit score showdown could reshape the future of underwriting. If both models perform well and regulators stay engaged, competition could lead to better outcomes for borrowers and greater scoring transparency. But if risks emerge, lenders and policymakers may swiftly pull back to preserve market stability.
For now, the battle lines are drawn. Lenders have new tools, borrowers may get greater access, and credit bureaus are preparing for a battlefield that’s finally come out of the shadows. As this rivalry unfolds, the mortgage landscape may never look the same.
