Credit Score Shake-Up Could Help Millions Buy a Home—but Lenders Say There’s a Hidden Risk

The Federal Housing Administration's push to modernize credit scores could change the system, but also brings new risk, analysts say.Financial firms studying the FHA's shift to encourage Fannie Mae and Freddie Mac to adopt VantageScore 4.0 expect consequences on the system. With VantageScore 4.0, as well as FICO 10-T, banks can incorporate rental and utility payment history when considering whether to approve someone for a mortgage.In September, FHA Director Bill Pulte said on X that FHA would combine and use the same pricing grid for both VantageScore and FICO. That came after feedback from lenders and consumers, he said.But those changes could insert more risks into the financial system, several analysts told the Wall Street Journal. That's because VantageScore and FICO use different metrics in scoring. If they're used interchangably, consumers could favor their VantageScore, which tends to be higher.Pulte has cast the move as updating how credit scoring works to incorporate modern financial habits. VantageScore believes its scoring might make it easier for 7.7 million Americans to qualify for a mortgage. Many of these people have thinner traditional credit files."We do not care ...