The mortgage industry is undergoing a historic change that will shape the future of credit risk assessment, consumer access to mortgage financing, and lender innovation. The introduction of VantageScore 4.0 and FICO 10T into the government-sponsored enterprise (GSE) credit evaluation process marks the beginning of a more inclusive, competitive, and data-driven lending environment. Just like everyone right now, I am trying to absorb and make sense of what this means immediately and in the future. I joined a webinar hosted by Vantage and Xactus and gained some knowledge, but this is a fast-evolving development and I wanted to share what we know, but also keep a fluid discussion of events as they occur. Each day brings about new information.
This blog explores what this shift means for lenders, mortgage loan officers, and consumers—and how to get ready.
Why the Change Matters
For decades, conforming mortgage loans sold to Fannie Mae and Freddie Mac relied solely on the Classic FICO score. At the MBA conference in 2022, talks about the VantageScore 2.0 and FICO 10T began to surface. This was going to revolutionize the industry! The Federal Housing Finance Agency (FHFA) officially introduced an interim phase that allows lenders to choose between Classic FICO and VantageScore 4.0. This represents more than just a choice; it opens the door to a broader view of creditworthiness and paves the way for FICO 10T in the near future.
Key Benefits of VantageScore 4.0:
- Uses rental, utility, and telecom data to score more consumers
- Removes non-predictive data like medical debt
- Scores an additional 33 million Americans who were previously unscoreable
- Offers consistent results across all three major credit bureaus
Key Benefits of FICO 10T:
- Built with trended data, offering a dynamic view of borrower behavior over time
- Detects 18% more likely defaulters than Classic FICO in the lowest score decile
- Avoids penalizing consumers for lack of mortgage history
- Already being used outside the conforming market by lenders with $300B+ in annual originations
Benefits for Consumers
Greater Access to Credit: By incorporating non-traditional data, VantageScore 4.0 expands access to homeownership for individuals who have strong financial habits but limited credit history.
Deeper Behavioral Insight with FICO 10T: Trended data in FICO 10T shows how consumers manage credit over time—not just a snapshot—giving lenders a more accurate view of financial responsibility.
No Mortgage Penalty: Both VantageScore 4.0 and FICO 10T do not penalize those without an existing mortgage—a win for first-time homebuyers, military families, and renters.
Transparency and Awareness: Consumers who now receive a score can identify where they stand and take steps to improve their credit profile.
Benefits for Lenders and Mortgage Companies
Operational Flexibility: Lenders can choose to implement scoring models at the loan level or enterprise-wide, providing tactical flexibility. It is important for Lenders to track and monitor score results for the FICO Classic and the VantageScore 2.0, and eventually FICO 10T. There is no historical data available that can inform Lenders which model would be better for various borrower scenarios. Currently, both scoring models must be purchased before an assessment can be made. That is a win for the Vantage and FICO, but an increased expense for Lenders and consumers.
Enhanced Portfolio Performance: Studies show a 2%–4% improvement in predicting delinquencies and prepayments for VantageScore 4.0, and even higher for FICO 10T. FICO reports show an 18.1% lift in detecting high-risk borrowers over Classic FICO.
Competitive Advantage: Lenders who test and adopt these new models now will be far ahead of the curve when dual-score delivery becomes mandatory.
Increased Loan Volume: With more consumers receiving scores, lenders have a larger pool of prequalifiable leads.
Support from Credit Reporting Agencies: Credit reports with VantageScore 4.0 are already available from providers like Xactus, Factual Data, and Equifax Mortgage Services.
FICO 10T vs. VantageScore 4.0: A New Competitive Landscape
What makes this transition so unique is that for the first time ever, two credit score models will compete side-by-side in the mortgage space. Each has its strengths:
- FICO 10T emphasizes long-term behavioral patterns using trended data, a strong signal for identifying payment risk over time.
- VantageScore 4.0 also uses trended data but emphasizes inclusion by scoring more consumers through alternative data like rent and utilities.
This dual-model environment drives innovation, transparency, and pricing accuracy. Lenders will have more tools to tailor risk models, improve approvals, and enhance margins. It also means credit model developers must constantly improve—a win for consumers and investors alike.
Over time, competitive pressure will ensure that both models continue to evolve. That competition is what has driven VantageScore 4.0 to expand its coverage and prompted FICO to create its most powerful score yet.
Industry Readiness and Implementation Steps
- Start Testing Now: Many lenders are already ingesting VantageScore 4.0 on the non-conforming side to analyze performance and prepare for adoption.
- Evaluate System Readiness: Ensure your LOS, POS, pricing engines, and DU/LPA integrations can accept both models.
- Review and Update Disclosures: Score bands, reason codes, and visualizations differ. Make sure compliance and consumer communications are aligned.
- Train Internal Teams: Update simulation and optimization strategies to reflect the different logic in VantageScore and FICO 10T. Coding efforts are still required for credit optimization tools and currently in the works.
- Monitor Secondary Usage: Federal Home Loan Banks in regions like Chicago, Dallas, New York, and San Francisco accept VantageScore 4.0 for pledged mortgage collateral. The VA also allows its use for pricing decisions.
- Engage Consumers: Educate borrowers on what the new scores mean and how it might influence their eligibility or interest rate.
What’s Next from FHFA?
We are currently in an interim “lender choice” phase, but FHFA has already announced that full implementation will include mandatory delivery of both VantageScore 4.0 and FICO 10T. This dual-score delivery phase will require lenders to be fully integrated with both models.
The shift is inevitable. The choice is whether you lead or scramble to catch up.
Final Thoughts
Credit scoring is no longer a one-size-fits-all solution. With the entrance of VantageScore 4.0 and FICO 10T, lenders and consumers now have tools that reflect modern data science, real-life behavior, and broader access.
At Next Level Education, we are committed to equipping mortgage professionals with the knowledge, strategy, and readiness to thrive in this next era of lending.
Get ahead of the change. Prepare your teams. Engage your systems. Train your people.
Ready to begin? Contact Xactus or your credit provider to start testing and implementing today.
Let’s modernize mortgage lending. Together.
