New Credit Score Rule Could Help More Buyers Get a Mortgage – Forbes Advisor

A new rule could help millions qualify for a mortgage, especially renters, gig workers and those with limited credit history.

This marks a significant shift in mortgage lending, as Fannie Mae and Freddie Mac will now permit lenders to use VantageScore 4.0, a credit scoring model that could unlock homeownership opportunities for millions.

Here’s why: FICO requires at least six months of credit history and recent activity to generate a score. If you don’t have both, you’re invisible to lenders.

VantageScore is more flexible. It can generate a score with as little as one account—whether that’s a credit card, a collection or even a bankruptcy—and doesn’t require six months of history or recent activity. That makes it a game-changer for first-time buyers, especially younger adults or people who mostly pay in cash.

The change is effective immediately, the Federal Housing Finance Agency (FHFA) announced on July 8. Lenders can now choose between VantageScore and traditional FICO scores when approving home loans—no tech overhaul required.

FHFA director William J. Pulte made the announcement in a post on X, calling the move a step toward lowering closing costs and expanding access to “forgotten Americans.”

“We are expanding credit access to millions of forgotten Americans—people who live in rural areas, renters who pay their rent on time every month—and bringing down closing costs,” Pulte wrote.

Why This Matters

This isn’t just a back end switch. It’s a big win for renters, young buyers and people with thin or unconventional credit histories. VantageScore 4.0 uses rent, utility payments and other nontraditional data to assess credit. It also ignores medical debt and paid collections.

In plain terms? More people may now qualify for a mortgage, especially first-time buyers who’ve been locked out of the system.

The update also keeps the Tri-Merge credit reporting format, so lenders don’t have to rebuild their systems. That means less friction, lower costs and faster rollout.

What Is VantageScore 4.0?

VantageScore is the lesser-known cousin to FICO, created by Experian, TransUnion and Equifax in 2006 to add competition to the credit scoring market.

The newest version, VantageScore 4.0, launched in 2017. It scores on the same 300 to 850 scale as FICO, but it looks at different factors.

Key differences:

• Scores consumers with just one month of credit history (FICO requires six)
• Includes rent, utility and cellphone payments when available
• Excludes medical collections and paid-off debts

It’s also the score you’re most likely to see when checking your credit on apps, banking sites or personal finance platforms.

How To Boost Your VantageScore

VantageScore uses “trended credit data,” not just a snapshot. Unlike traditional models, it examines how your credit behavior evolves over time, rather than just a single moment. That means it can reward responsible habits and help consumers avoid the credit-use trap, where using credit to build credit ultimately hurts their score.

10 Ways to Boost Your VantageScore 4.0:

1. Pay your bills on time.
   Payment history makes up 41% of your score, so it’s a big deal. Set reminders, use autopay, do whatever it takes to avoid missing a due date.

2. Avoid late payments.
   Even one payment that’s 30 days late can seriously ding your score.

3. Keep your credit card balances low.
   Try to use less than 30% of your credit limit—less than 10% is even better. If you’re nearing your limit, consider paying early or making multiple payments each month.

4. Ask for a credit limit increase.
   If you have a good payment history, your card issuer might bump up your limit, which can lower your utilization ratio (a good thing for your score).

5. Hold onto older credit cards.
   Length of credit history matters. Don’t close old accounts unless you absolutely have to.

6. Mix it up, credit-wise.
   If possible, maintain a mix of credit types, such as a credit card and a car loan. Variety can give your score a small lift over time.

7. Go easy on new applications.
   Applying for too many credit accounts at once can hurt your score. Only apply when it makes sense.

8. Check your credit reports for mistakes.
   Get free reports from Equifax, Experian and TransUnion at AnnualCreditReport.com. Look for errors, outdated information or anything suspicious.

9. Dispute anything that’s wrong.
   If you spot an error, file a dispute with both the credit bureau and the company that reported it. Fixing mistakes can give your score a quick boost.

10. Know that VantageScore 4.0 works differently.
    It’s more responsive to your recent behavior and uses trended data—meaning it looks at your credit habits over time, not just a single moment. So if you’re building better habits now, your score may reflect it sooner than you think.

You can check your VantageScore through your bank or credit card issuer.