Why Mortgage Lenders Should Test VantageScore 4.0 Now: A Data-Driven Look at Cost Savings and Broadened Credit Access
Highlights:
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Last year, The FHFA (Federal Housing Finance Agency) approved VantageScore 4.0 for loans sold to the Government-Sponsored Enterprises (GSEs), marking a historic change in the mortgage industry.
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Transitioning to VantageScore 4.0 is projected to deliver a potential $1B in savings to mortgage lenders and borrowers, as the model costs up to 90% less than legacy credit scores.
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By incorporating trended credit data, rental history, and utility attributes, VantageScore 4.0 helps qualify 10% more borrowers and provides a 15% higher success rate at predicting defaulters.
The mortgage industry experienced a historic change last year: The FHFA has approved VantageScore 4.0 for loans sold to the GSEs. Because of this shift, VantageScore 4.0 is no longer just an “alternative”—it is the future of conforming mortgage lending. With legacy score costs skyrocketing in recent years, this pivotal step by the FHFA offers profound opportunities for mortgage affordability and immediate P&L relief.
Here is a look at the key insights driving this shift and why lenders should be testing VantageScore 4.0 today:
1. Multi-Million Dollar Savings and Pricing Stability
In an era of rising costs and recent legacy score hikes, VantageScore 4.0 offers immediate bottom-line savings and greater pricing stability. The financial difference is stark: VantageScore 4.0 costs just $1, which is 90% less than the $12 cost of legacy credit scores (which includes re-issues). Switching to VantageScore 4.0 isn't merely a strategic move; this more accurate and affordable score is projected to deliver $1 billion in overall savings to mortgage lenders and borrowers. Lenders who fail to test VantageScore 4.0 will simply continue to overpay.
2. Expand Your "Buy Box" Without Adding Risk
Legacy credit models often leave millions of creditworthy Americans in the dark. VantageScore 4.0 illuminates these consumers by utilizing a 24-month lookback to assess the trajectory of a consumer's credit behavior alongside enriched data like rental history, telco, pay TV, and utility attributes—all provided at no additional cost.
This visibility allows lenders to expand their "buy box" and uncover borrowers that legacy scores miss. VantageScore 4.0 helps qualify 10% more borrowers, many of whom are first-time homebuyers. Those with credit scores above 620, or those seeking larger loans, may now qualify for Fannie Mae or Freddie Mac GSE mortgages. Most importantly, this expansion does not mean lowering standards; VantageScore 4.0 actually delivers a 15% higher success rate at predicting defaulters.
3. Achieve a Competitive Edge with Early Adoption
Lending institutions are already using VantageScore credit scores to provide consumer credit products like credit cards, auto loans, personal loans and mortgages. The numbers speak for themselves: in 2024, 42 billion VantageScore credit scores were used, reflecting a massive 55% year-over-year growth. Furthermore, VantageScore 4.0 has exploded from roughly two Equifax early adopter Mortgage customers to over 250.
The Opportunity Is Now
The peer validation is clear, meaning the true risk and cost are now in waiting. Don’t wait to realize the massive cost savings, improved accuracy, and broadened credit access. Start testing VantageScore 4.0 today to gain immediate access to a massive untapped market.
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