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Home News Real Estate

VantageScore Approved for Mortgage Underwriting, Challenging FICO’s Dominance

by Team Lumida
July 9, 2025
in Real Estate
Reading Time: 4 mins read
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VantageScore Approved for Mortgage Underwriting, Challenging FICO’s Dominance
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Key Takeaways:

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  1. Regulatory Approval: The Federal Housing Finance Agency (FHFA) has approved the use of VantageScore 4.0 for mortgage underwriting, alongside FICO 10T, for loans backed by Fannie Mae and Freddie Mac.
  2. Impact on FICO: Shares of Fair Isaac Corp. (FICO) fell nearly 9%, reflecting concerns over increased competition in the$13 trillion mortgage market.
  3. Expanded Credit Access: VantageScore incorporates alternative data like rent, utility, and telecom payment history, potentially improving credit access for renters and rural borrowers.
  4. Market Dynamics: Analysts believe FICO’s dominance may persist in the short term, as lenders are more familiar with its models and cautious about switching due to underwriting risks.
  5. Pricing Pressure: FICO’s pricing power, a key driver of its earnings growth, could erode as competition intensifies, with VantageScore offering a cost-effective alternative.

What Happened?

The FHFA announced that mortgage lenders can now use VantageScore 4.0 or FICO 10T for loans sold to Fannie Mae and Freddie Mac. This marks a significant shift, as FICO previously held a monopoly in the mortgage market.

VantageScore, developed by Experian, Equifax, and TransUnion, has gained traction in the credit card and auto-lending sectors but lagged in mortgages. Its inclusion is part of a broader effort to expand credit access, particularly for underserved groups.


Why It Matters?

The decision introduces competition in a market long dominated by FICO, potentially lowering costs for lenders and improving credit access for borrowers. However, it also raises questions about adoption rates, as lenders may stick with FICO due to familiarity and risk aversion.

For FICO, the move threatens its pricing power, which has been a major driver of its revenue growth. The company charges$4.95 per credit score pull, up from$0.60 in 2018, a model that could face pressure as VantageScore gains traction.


What’s Next?

While VantageScore’s approval is a win for competition, its adoption will depend on how quickly lenders adapt to the new model. Analysts expect FICO to maintain its dominant position in the near term, but its long-term market share could erode if VantageScore proves effective and cost-efficient.

The FHFA’s decision also signals a broader push for inclusive credit policies, with potential implications for other lending markets. Investors will closely monitor how this regulatory shift impacts FICO’s financial performance and market dynamics.

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© 2025 Lumida Wealth Management LLC is an SEC registered investment adviser. Privacy Policy. Cookies Policy.
Disclaimer Important Information This site is for informational purposes only. Information presented on this site does not constitute as investment advice.

Lumida Wealth Management LLC (‘Lumida”) is an SEC registered investment adviser. SEC registration does not constitute an endorsement of the firm by the Commission nor does it indicate that the adviser has attained a particular level of skill or ability.

Lumida's website (referred to herein as the "Website") is limited to the dissemination of general information pertaining to its advisory services, together with access to additional investment-related information, publications, and links. Accordingly, the publication of the Website on the Internet should not be construed by any client and/or prospective client Lumida’s solicitation to effect, or attempt to effect transactions in securities, or the rendering of personalized investment advice for compensation, over the Internet.

Any subsequent, direct communication by Lumida with a prospective client will be conducted by a representative that is either registered or qualifies for an exemption or exclusion from registration in the state where the prospective client resides.

‍Lead Capture Forms: By submitting your contact information in the forms on this site, you are not obligated to invest in Lumida's product or services.
‍Address: Lumida Wealth Management, 25 W 39th Street Suite 700, New York, NY 10018