A Big Nod from FHFA
Pulte announced on social media platform X (formerly Twitter) post that, “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),” as quoted by Investing.Com.
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What Makes VantageScore 4.0 Unique?
The VantageScore 4.0 is the latest generation of the credit scoring model by VantageScore, which was launched in 2017, as per Business Insider. Unlike the previous three models of VantageScore from 1.0 to 3.0, VantageScore 4.0 takes into account “trended data,” as reported by Business Insider.
The trended credit data can consider the changes and trends in the user’s credit history, like the number of times the user has paid more than the minimum balance on their credit card over the past 24 months in the 4.0 version, according to the Experian report.
ALSO READ: How one tiny Myanmar town controls the globe’s rare earth supply and is holding the world hostage – the real storySenior vice president of marketing and communications at VantageScore Solutions, Jeff Richardson, had told Experian that, “The difference is that 4.0 built on the success of 3.0,” adding, “It scores those with thin files much more precisely,” as quoted in the report. According to Business Insider, the VantageScore 3.0 and 4.0 have ranges from 300 to 850, which is separated into five risk categories, with a good VantageScore starting at 661, and an excellent credit score starting at 781. While very poor score starts from 300, poor starts from 500 and fair score starts from 601, as per the report.
Why It Matters for You
VantageScore is important as many lenders use VantageScore to determine creditworthiness for loan and credit card approvals, as per the report. While, a user’s VantageScore can also be used to set interest rates and other loan terms, and these scores can also be used to make apartment rental decisions and insurance premiums, according to Business Insider.
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According to the Experian report, firms may even use a VantageScore credit score before sending firm offers of credit, when reviewing customer accounts and adjusting credit limits and when they want to sell existing loans to investors.
A credit expert and former employee of FICO and Equifax, John Ulzheimer told Business Insider, pointing out that while the majority of lenders still use FICO scores when making lending decisions, many have started to use VantageScore, saying, “Being in the second position in the credit score space is still a really good place to be, given the massive volume of credit scores used every year,” as quoted in the report.
FAQs
What is VantageScore 4.0?
It’s the latest version of the VantageScore credit scoring model, created by the three major credit bureaus. It was launched in 2017 and uses advanced data to predict credit behavior.
How is it different from earlier versions?
VantageScore 4.0 uses trended data, which considers how you’ve used credit over the past 24 months, not just your current snapshot.
