Pulte’s VantageScore bombshell sends the mortgage industry scrambling

Sources said Fannie Mae and Freddie Mac are not yet prepared to purchase VantageScore4.0 loans. And despite the adoption of VantageScore 4.0, FHFA will still require lenders to submit data from all three major credit bureaus, Experian, TransUnion and Equifax, which jointly own VantageScore. That deviates from the Biden administration’s plan to transition the industry to a bi-merge system, and runs counter to trade group advocacy for a single credit report approach.

“Currently, the requirement for lenders to use all three bureaus has our expectations very low for any decline in report costs for the mortgage industry. Additionally, the price of the FICO and VantageScore models are equal from each bureau we purchase and resell data from,” Melillo said. 

In November 2024, Fair Isaac Corp. (FICO), which licenses the most widely used credit score in mortgage lending, raised its wholesale royalty fee from $3.50 to $4.95 per score. FICO argues the fee represents just a fraction — around two-tenths of one percent — of the typical $6,000 closing costs on a mortgage and 15% of the $80-$100 tri-merge bundle cost. 

Pulte’s surprise announcement was unclear about whether lenders will be able to choose between VantageScore or FICO credit score models; or if they’ll need to use both.

Brendan McKay, owner of Mckay Mortgage and chief advocacy officer at the Broker Action Coalition (BAC), said it’s possible costs actually go up in the short term if both reports are pulled by lenders. 

“It’s also important to recognize that while FICO has raised its prices by over 400% in recent years without meaningful justification, the broader issue of credit report cost hikes lies with the credit bureau themselves. This move doesn’t address that problem. In fact, since VantageScore is owned by the credit bureaus, it could introduce new conflicts or challenges down the road.” 

Jason Haas and Jun-Yi Xie, Wells Fargo analysts covering FICO, wrote in a report on Wednesday morning that while any incremental usage of VantageScore would bring more revenues to the three bureaus because they own the company, they also benefit from FICO’s price increases, which limits their incentives to engage in a price war. 

Another reason for prices to not decline anytime soon: The three credit bureaus “have contracts with both FICO and VantageScore through the end of the year, so they’re not going to reduce those costs up front,” according to Don Clement, assistant vice president at credit reporting agency CIC Credit.

However, Clement anticipates a pricing war when the contracts start to renew in 2026 due to VantageScore efforts to gain some market share.

“That might be beneficial to the consumer, but that’s assuming that this truly is adopted by the industry,” Clement said. “I have spoken to all three of my bureau reps, and none of them had a clue this was happening – there are no guidelines.” 

Market adoption 

Shelley Leonard, president of credit reporting agency Xactus, on Wednesday said she was working with the credit bureaus to make VantageScore information available to all clients. Her main concern, however, is to make sure those receiving the score are prepared and understand the differences of credit scores. 

According to Leonard, the GSEs need to update LLPAs, which hasn’t happened yet, to reflect the new credit score information. These loan-level price adjustments are fees associated with conventional loans, applied to mortgages based on factors like the credit score and down payment. 

“We were a little bit in a waiting pattern or holding pattern,” Leonard said. 

FICO says that more than two dozen mortgage lenders have signed up to adopt its 10T Score through an early adoption program launched in 2023. This option is not operational for GSE loans.

The FHFA initially mandated the GSEs to accept VantageScore in October 2022, giving until the fourth quarter of 2025 to implement the change. Since then, the Veterans Administration has begun accepting it. VantageScore reported — based on an analysis by Charles River Associates — that its credit score was used 502 million times by mortgage originators in 2024.

But mortgage professionals anticipate challenges related to technology and operational processes in the widespread adoption of VantageScore 4.0. 

McKay noted that some lenders are better prepared than others for this “significant technology shift.” Many rely on third-party LOS and POS platforms, which could create bottlenecks unless those technology providers adapt quickly, he said.

Secondary questions

FICO has been in use since the late 1980s, while VantageScore was introduced around 2007. When VantageScore was launched, their score range was 400–900 compared to FICO’s 350–850, but now they are similar, industry executives said. Credit reporting agencies say they are ready for the change but there are still uncertainties for lenders.

“Prior to Pulte’s announcement, the FHFA had postponed implementation indefinitely — specifically due to these operational questions. Loan origination systems can easily import new score models, but most are currently only programmed to accept three scores per borrower,” Melillo said. “The GSEs can receive the data, but the real issue becomes: is a 680 FICO the same as a 680 Vantage? That’s the kind of nuance that needs clarity before full-scale adoption.”

The Wells Fargo analysts covering FICO said that it’s unclear if the FHFA has removed the FICO mandate for conforming mortgages and moved to “FICO or VS,” but in either case, “optionality does not equal immediate change.” One example: FICO is not mandated in the non-conforming space and there’s a limited use of VantageScore, they added. 

“Shifting lending processes is both time-consuming and costly for lenders, especially given the FICO score is already deeply embedded in existing systems,” they said. 

Analysts also noted that FICO is the sole credit risk measure in over 95% of mortgage securitizations, which is an $8 trillion market. A shift to VantageScore could prompt investors to demand higher risk premiums, limiting adoption and potentially leading to higher mortgage rates for consumers.

Other open questions include the readiness of mortgage insurance companies to accept and use VantageScore4.0. Trade group U.S. Mortgage Insurers did not immediately return a request for comment.

FICO, which is still awaiting to hear when its more modern 10T product can be used, is said that it “welcomes competition on a level playing field among credit score providers” and that “the safety and soundness of the [U.S. credit] system is built on the integrity of the FICO Score.” 

Pete Mills, the Mortgage Bankers Association‘s SVP of residential policy and member engagement, said the trade group will work with the GSEs, member organizations and other stakeholders to achieve a smooth transition. The trade group has “consistently advocated for increased competition in credit reporting and scoring and welcomes the opportunity to get after it and work with the GSEs on the implementation,” he said.