How Recent Changes to Credit Scoring Could Make Qualifying for a Mortgage Easier for More Buyers

If your recent mortgage application was rejected because your credit file is too thin or otherwise didn’t align with traditional credit scoring, now may be the time to reapply—this time with lenders using a new scoring model. According to some estimates, millions of potential borrowers may now be eligible when they weren’t before.That’s because mortgage lenders now have the option to use VantageScore 4.0, a more inclusive credit scoring model, alongside the traditional FICO score for loans sold to Fannie Mae and Freddie Mac, which account for the majority of U.S. mortgages.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.“The enlargement of the credit requirement will lead to more first-time buyers coming on to the market,” said NAR Chief Economist Lawrence Yun. “This is great news for financially responsible people in America.”Indeed, this change reportedly means 5 million new prospective buyers could qualify for homeownership, with an estimated $1 trillion in new mortgage activity anticipated as a result. However, keep in mind this key d...