FHFA Greenlights VantageScore 4.0
Director of US Federal Housing FHFA, William Pulte, wrote about the change on social media site X (previously Twitter), saying 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 in its report.
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Competitive Pressure Mounts for FICO
The latest decision will reportedly negatively impact Fair Isaac, which is the company behind the widely used FICO credit score, because it will potentially face more intense competition in the mortgage lending market, as reported by Investing.com.
According to the Investing.com report, VantageScore 4.0, which was launched in 2017, uses machine learning and trended credit data to evaluate a consumer’s creditworthiness and the model was specially designed to assess borrowers with limited or “thin” credit files, potentially expanding the pool of mortgage-eligible consumers.
The latest policy change is in line with the stated goals to jump competition in credit scoring and potentially limit costs in the housing finance system, while also maintaining the existing tri-merge credit reporting infrastructure, as per the report by Investing.com.ALSO READ: SoFi stock surges 7% on Trump tax plan hype — earnings buzz builds ahead of July 29
Analyst Outlook Still Positive on FICO Stock
FICO stock has a consensus “Strong Buy” rating among 11 Wall Street analysts, the rating is based on nine Buy and two Hold recommendations issued in the last three months, and the average FICO price target of $2,430.50 is a 30% increase from current levels, as reported by TipRanks.
Credit Bureaus See Stock Gains Amid Expanded Role
While the stocks of credit bureaus that jointly built VantageScore, Equifax, Experian, and TransUnion, have jumped after the announcement, as per the TipRanks report.
FAQs
Why did FICO stock drop so much?
Because lenders can now use a competing credit score model, called VantageScore, which could take market share from FICO.
Who made this policy change?
The FHFA (Federal Housing Finance Agency) announced the decision, in a public statements from its Director, William Pulte.
