According to HousingWire, Rocket Mortgage announced it will become the first major mortgage lender to switch to VantageScore 4.0 as its primary credit scoring model. The company plans to make this transition in the fourth quarter for eligible loans, including those delivered to Fannie Mae and Freddie Mac, as well as VA home loans and certain other mortgage products.
Rocket Mortgage conducted an extensive testing period over about four months, pulling roughly 1.4 million credit reports using both VantageScore and traditional FICO scores to compare the two models. What they found was encouraging: some borrowers who might not have qualified using FICO were able to qualify with VantageScore, and many received better pricing terms on their loans as a result.
The financial impact for borrowers who benefited from using VantageScore was meaningful. According to Rocket Mortgage's testing, those borrowers saved an average of sixteen hundred dollars in closing costs. VantageScore 4.0 is designed differently than FICO in that it looks at how credit behavior changes over time, examining patterns in payments and account balances. It can also take into account rent and utility payment history if that information exists in a borrower's credit file, which opens doors for people with limited credit histories to still get scored and potentially qualify.
Not all loan products will shift to VantageScore just yet. Investment properties, second homes, home equity lines, FHA loans, and jumbo mortgages will continue using FICO scores for now. Rocket Pro, which serves mortgage brokers, will continue offering brokers both scoring options so they can choose what works best for their clients.
The move aligns with direction from federal housing regulators. The Federal Housing Finance Agency has been working to integrate VantageScore 4.0 into the mortgage landscape for loans sold to the government sponsored enterprises, reflecting a broader push toward using multiple credit models in the industry.
What I am seeing locally here in the Bay Area is that anything which can help qualified borrowers access mortgages and save money at closing is worth paying attention to. Many of our buyers, especially first-timers and those with nontraditional credit histories, have felt locked out by rigid lending standards. If VantageScore opens doors for more people in the East Bay and around Fremont to qualify for home loans, that's meaningful for our communities.
