Lenders Shift Mortgage Scoring Beyond Traditional FICO Models

Mortgage lenders in the United States are moving away from decades-old scoring formulas toward newer credit models, a shift that could change what qualifies as a strong credit profile for a home loan, CNBC reports. Two models — VantageScore 4.0 and FICO 10T — are the ones lenders are increasingly testing alongside the classic FICO score long used in underwriting, according to the outlet.

The change matters because a mortgage remains the largest recurring debt most households take on, and the score used to evaluate an applicant can affect not just approval but pricing on the loan.

What's changing in mortgage credit scoring?

For years, mortgage underwriting in the United States has relied on classic FICO scores built from a borrower's credit file at a single point in time. CNBC reports that lenders are now evaluating VantageScore 4.0 and FICO 10T, both of which represent newer generations of scoring technology built by the two dominant firms in the space, FICO and VantageScore Solutions. The report frames this as an evolution already underway rather than a single rule change taking effect on one date.

Credit Scoring Models in Transition

• FICO 10T — a newer version of the FICO score that lenders are beginning to test for mortgage underwriting, per CNBC.
• VantageScore 4.0 — a competing model some lenders are evaluating alongside classic FICO scores, according to the outlet.

Why are lenders moving beyond traditional FICO scores?

CNBC's reporting frames the shift as part of a broader move in mortgage underwriting toward models that its sources say better reflect a borrower's credit behavior over time. The outlet does not specify a single driver behind the change, but notes lenders are looking at these newer models as alternatives to the score formulas that have anchored mortgage approvals for years.

Which credit behaviors will matter more under the new models?

According to CNBC, the shift could change which credit behaviors carry the most weight when a lender reviews a mortgage application. The outlet reports that the new models are built differently from the classic FICO formula, meaning the factors that helped or hurt a score under the old system may not carry the same weight under the new one. CNBC's reporting stops short of detailing every specific factor lenders will prioritize, but it identifies the shift toward VantageScore 4.0 and FICO 10T as the mechanism driving the change.

How could this affect homebuyers applying for a mortgage?

Homebuyers preparing to apply for a mortgage may find that the score a lender pulls, and the behaviors it rewards or penalizes, differ from what borrowers have grown used to under classic FICO, CNBC reports. That has implications for how a prospective buyer manages credit in the months before applying, since the same financial habits could be scored differently depending on which model a lender uses.

A related HTT News report from San Francisco found that consumers already hold a negative perception of credit scores generally, a sentiment that could deepen if borrowers find scoring criteria harder to predict during a model transition.

"Mortgage credit scores are evolving," CNBC's headline states, underscoring that the change is gradual rather than a single cutover date for the industry.

What should borrowers watch for next?

CNBC's reporting points to a period of transition rather than an immediate, universal switch, meaning borrowers won't necessarily see one model replace the other on a fixed timeline. Homebuyers and their loan officers are likely to see both classic FICO scores and the newer models in use during this stretch, based on the outlet's account.

What to watch:

• Which score a lender pulls when a buyer submits a mortgage application, since it may not be the classic FICO score alone.
• Whether loan officers explain which model — FICO 10T or VantageScore 4.0 — factored into an approval or denial.
• How credit reports are read differently across models, since CNBC reports the newer versions are structured differently from the classic formula.
• Any updates from individual lenders about which scoring model they use for mortgage underwriting.

Borrowers with questions about how a specific lender scores mortgage applications should ask directly which model is being used before applying, since CNBC's reporting indicates that answer can vary firm to firm during this period of change.

For the full report, see CNBC's coverage of the shift in mortgage credit scoring.

Artiglio is A coming-soon iPhone chief of staff for briefings and drafts. Not on the App Store yet.