Are Vantage Scores about to start mattering?

[dynamicvb]

Seems Fannie Mae and Freddie Mac may be going to start relying upon Vantage scores. Not sure if this will go anywhere but its an interesting read to be informed of possible changes coming.

https://www.huffpost.com/entry/equifax-housing-finance_n_5d5596e0e4b0eb875f209cc3

[Brian_Earl_Spilner]

VantageScores have always mattered, just nowhere near the extent of FICO. FICO is King, but VS provides better trended data, and lately, that seems to be what matters. I was declined a new NFCU card and CLI on an existing card based on 12 months of trended data.

[Anonymous]

I don't believe so, but I am basing the facts on that FICO is the standard.

[longtimelurker]

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@Anonymous wrote:

I don't believe so, but I am basing the facts on that FICO is the standard.

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Well, the whole point of the article (and other similar ones) is that that is about to change.  Vantage may start being the most important score in mortgages, and then that can easily spread to other things like credit cards and car loans.....

[iv]

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@longtimelurker wrote:

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@Anonymous wrote:

I don't believe so, but I am basing the facts on that FICO is the standard.

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Well, the whole point of the article (and other similar ones) is that that is about to change.  Vantage may start being the most important score in mortgages, and then that can easily spread to other things like credit cards and car loans.....

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It's still not very likely...

Read the relevant final rule here:

www.fhfa.gov/SupervisionRegulation/Rules/RuleDocuments/8-7-19 Validation Approval Credit Score Models Final Rule_to Fed Reg for Web.pdf  (12 CFR 1254, RIN2590-AA98)

All that has actually changed recently is the removal of the proposed rule that explicitly blocked Vantage (by disallowing shared ownership of the data source companies and the scoring companies). And that could have been worked around anyway, by spinning Vantage out into independent ownership (rather than the current joint-venture setup between EQ/TU/EX).

IF the GSEs choose to switch from EQ5/TU4/EX2 at all... it's still just as likely (or more likely) that they will go with a FICO 8/9 variant rather than a Vantage variant. The MOST likely option is no change at all.

It's now technically possible for Fannie and Freddie to choose something else... but it's also technically possible for the two of them to choose different scoring models from each other, to allow multiple scoring models at once, or even to stop considering third-party credit scores at all. Possible, but unlikely.

And if a change was to actually happen - we are at least 2 years from the announcement of the "winner", and 4 years from the actual switch.

I predict that by 2022, we'll see an accelerated approval process for "review" of the existing FICO 5/4/2 scores that leaves them in place for this first review cycle, followed by various pilot programs under Section 1254.11, probably initially targeting thin-file and currently "unscorable" borrowers. Additional pilots targeted at other sub-groups might then lead into alternative models having a chance in the next review cycle, probably around 2026 to 2030.

Of course, by that point the FHFA rules may have changed again; there might be additional competition in the scoring market; the "big three" CRAs might have changed (EQ might disappear, leaving a "big two"; or be replaced by one of the 2nd-tier CRAs like Innovis; or one of those 2nd-tier CRAs might have risen to the EQ/TU/EX level resulting in a "big four").

The requirement by the GSEs for a tri-merge report, specifically from EQ/TU/EX, is a big part of why the "big three" stay the big three.  While that's not currently being re-considered, any future rule change there could make big waves in the CRA industry. (And also affect which score models could be used.)