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Fannie Mae and Freddie Mac’s federal regulator will allow mortgage lenders to start using a new credit score algorithm developed by the big three credit bureaus to take on the venerable FICO score.
But when employing the new VantageScore 4.0 algorithm, lenders will still be required to use a “tri-merge” process in which three scores are calculated separately by each of the major credit bureaus.
The Biden administration had proposed requiring lenders to use two credit scoring algorithms — VantageScore 4.0 and FICO Score 10 T — to obtain scores from two credit reporting agencies (in a “bi-merge” report), for a total of four scores.
It’s not entirely clear how the new Federal Housing Finance Agency (FHFA) policy for scoring borrowers will work — if, for instance, lenders will have the option of using VantageScore 4.0 instead of the Classic FICO score now in use, or if they’ll be required to use it in addition to Classic FICO.
Effective today, to increase competition to the Credit Score Ecosystem and consistent with President Trump’s landslide mandate to lower costs, Fannie and Freddie will ALLOW lenders to use Vantage 4.0 Score with no current requirement to build new infrastructure (stays Tri Merge).
— Pulte (@pulte) July 8, 2025
FHFA Director Bill Pulte summarized the changes on the social media platform X Tuesday, saying they were “effective today.” The FHFA did not issue a press release, and Pulte did not post a copy of the official directive on X, as he has with some past orders.
The FHFA did not respond to Inman’s requests for comment.
Pulte said that Fannie and Freddie will allow lenders to use VantageScore 4.0, but that tri-merge reporting will stay in effect.
TransUnion — one of the credit bureaus behind VantageScore 4.0 — has long opposed plans to move to bi-merge reporting, claiming that using only two credit scores “will often result in an incomplete and inaccurate picture being painted of a potential borrower — particularly if a consumer’s most favorable set of credit data is the one that gets excluded.”
In a statement Tuesday, TransUnion executive Satyan Merchant welcomed FHFA’s decision to keep tri-merge reporting, saying Pulte’s comments “demonstrate a commitment to responsible mortgage lending and preserving the best possible outcome for consumers.”
“Today’s announcement means more choice for lenders and more certainty for mortgage markets, which puts homebuyers on better footing long-term,” Merchant said.
Pulte has said in the past he was “not happy” about price increases levied by the company behind the FICO score algorithm, Fair Isaac, which an industry trade group, Community Home Lenders of America, claims total 700 percent over the last 3 years.
The Mortgage Bankers Association issued a cautious statement Tuesday, saying Pulte’s proposal “could help to accomplish the goals of added competition in the credit score space and reduced consumer costs, if implemented correctly.”
The trade group said there are “numerous implementation questions” that need to be addressed in order to realize such benefits.
The MBA “looks forward to working with FHFA and [Fannie and Freddie]” to address those questions, “as well as the continued conversations around credit reporting competition,” the group said in a statement to Inman.
Assuming Fannie and Freddie will accept three VantageScore 4.0 scores (one from each credit bureau) instead of three Classic FICO scores, that could encourage competition on price.
When FICO changed its pricing structure in 2023, moving away from volume-based pricing, smaller lenders saw their costs go up by more than 400 percent, Consumer Financial Protection Bureau Rohit Chopra told industry leaders attending the MBA’s annual convention last year.
But it’s the credit reporting agencies — Equifax, Experian and TransUnion — that typically set the wholesale price that resellers pay, which is then passed on to users, Chopra said.
The credit bureaus maintain files on consumers, tracking their debts and repayment history — information that’s fed into credit score algorithms like FICO and VantageScore to generate credit scores.
VantageScore — a joint venture of Equifax, Experian, and TransUnion — claimed Tuesday that implementation of VantageScore 4.0 will boost the eligible pool of mortgage applicants by 5 million borrowers.
Fair Isaac has made similar claims about the new FICO Score 10 T, saying it can help mortgage lenders boost originations by up to 5 percent without taking on additional credit risk.
“FICO Score 10T and VantageScore 4.0 are more predictive than Classic FICO and provide a more precise assessment of credit risk,” Fannie Mae said in a January update on plans to transition to the new scores. “Also, both models consider trended credit data and additional data such as rent, utility, and telecom payments, which are not currently considered as part of the Classic FICO score.”
Legislation signed into law by President Trump in 2018 required mandatory usage of the new credit scores by lenders selling loans to Fannie and Freddie by the end of this year.
But it’s unclear if FHFA will allow mortgage lenders to start using the FICO Score 10 T on the timeline originally proposed by the Biden administration.
Historical data aimed at smoothing the adoption of the new VantageScore 4.0 model was released last year, but similar data for the FICO Score 10 T has yet to be published.
In a statement, Fair Isaac said the company “welcomes competition on a level playing field among credit score providers.” When they’re originating loans not subject to Fannie and Freddie’s requirements, mortgage lenders have “rapidly embraced FICO Score 10 T’s ability to deliver lower costs and greater access for homebuyers,” the company said.
In December, Fair Isaac announced that Cardinal Financial sold the first batch of government-issued mortgage-backed securities to include VA loans qualified using the FICO Score 10 T. More than 21 mortgage lenders use FICO Score 10 T for non-Fannie and Freddie loans, the company said at the time.
Shares in Fair Isaac lost as much as 19 percent of their value Tuesday afternoon, but recovered most of those losses to close down 9 percent.
Editor’s note: This story has been updated to include a comment by Fair Isaac.
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