Mortgage lenders are beginning to accept a new credit scoring model, and it could become a major shift in the industry. For years, the mortgage world has relied almost exclusively on FICO scores to determine a borrower’s creditworthiness. But now, VantageScore is entering the conversation and creating new opportunities for buyers.

So what exactly is a FICO score? FICO, created by the Fair Isaac Corporation, evaluates borrowers based on several key factors including payment history, credit utilization, length of credit history, new accounts, and the mix of credit types such as mortgages, car loans, and credit cards. Lenders use these scores to assess risk. In general, the higher the score, the lower the perceived risk to the lender.

Now FICO has competition.

VantageScore uses a different scoring algorithm to evaluate credit. Since its recent rollout into the mortgage space, I have been testing and comparing the results. What I am seeing is that many borrowers are receiving higher VantageScores than their traditional FICO scores.

How could this help you?

For some borrowers, it could mean qualifying for a loan when they previously could not. For others, it may improve their pricing tier. Credit scores play a major role in mortgage pricing, and a higher score can potentially lead to a lower interest rate and increased buying power.

There is a catch, though.

This is still very new to the mortgage industry, and lenders are being cautious while they evaluate long-term risk. Right now, only a handful of lenders are beta testing these programs, and guidelines remain conservative. Currently, most programs are limited to conventional loans with at least 20% down. Mortgage insurance companies have not fully adopted the model yet, but that is expected to evolve over time.

The good news is that I already have access to lenders beginning to offer these programs. If you were previously told you did not qualify, or if you are curious whether a higher VantageScore could improve your options, now is the time to explore it.

This could truly become a game changer in the mortgage industry. Contact me today to see if I can help.