December 13, 2023

This year, the Federal Housing Finance Agency (FHFA) made the quite significant decision of abandoning the time-tested and proven single credit score model used by lenders issuing mortgages backed by government-sponsored enterprises (GSEs) Fannie Mae and Freddie Mac. By dumping the model that has been the cornerstone of lending for decades, FHFA has mandated that lenders issuing mortgages backed by GSEs must obtain two different credit scores for each applicant.

My organization, Consumer Action for a Strong Economy (CASE) warned of the risks inherent in introducing the untested VantageScore into an uncertain and turbulent housing market when government regulators’ top priority should be lending safety and security. While FHFA works on implementing two scores into the aforementioned one-score system, the inevitable pitch to consumers and lenders has begun. That marketing campaign never hints that the change could be harmful to our precarious housing market or hurt lenders and consumers alike.

Since FHFA announced its decision in October 2022, VantageScore has launched a massive public relations and marketing effort. One should expect that the promotion of an entirely new financial product that has the potential to negatively affect an industry essential to our economic security be responsible and accurate. Sadly, that is far from the case.

Especially troubling are VantageScore’s claims they are fostering an “opportunity for homeownership for millions more Americans” by having created a more reliable and “inclusive” lending score for millions of people without a sufficient history of credit.

It is critical these assertions are analyzed, given their enticing overtures to consumers.  A credit scoring model that relies on less data could certainly be more inclusive by scoring more people lacking credit history. But to say it is as reliable or even more reliable than the long-tested and proven model strains the bounds of credibility.

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