Fannie Mae, Freddie Mac Adopt New Credit Models with Rent Data

Fannie Mae and Freddie Mac, the government-sponsored enterprises that back most U.S. mortgages, announced Wednesday that they will begin accepting a new credit scoring model incorporating renters' and utility payment histories to help more Americans qualify for home loans. The change, directed by the Federal Housing Finance Agency, also extends to the Federal Housing Administration, which insures mortgages for many first-time buyers.

The updated models, VantageScore 4.0 and FICO Score 10T, use machine learning and alternative data to assess creditworthiness more comprehensively than traditional FICO scores. VantageScore 4.0, developed by the major credit bureaus, factors in on-time rent and utility payments reported to Equifax, Experian or TransUnion. FICO 10T similarly includes both positive and negative rental histories when available. These additions aim to benefit borrowers with thin credit files, such as young adults or those who primarily rent, by recognizing responsible payment behavior often overlooked in older systems.

Federal Housing Finance Agency Director William Pulte, who oversees Fannie Mae and Freddie Mac, described the shift during a Washington press conference....