Proposed House Bill Considers Alternate Credit Score Model

House Bill May Open Alternate Credit Scoring Models For Mortgages.

This week the House Senate initiated the Credit Score Competition Act that would allow Fannie Mae and Freddie Mac to consider alternate credit scoring models. Currently, the government sponsored enterprises (GSEs) use the FICO score which was introduced by the Fair Issac Corporation.

According to HousingWire.com, three senators are reopening a legislation that was initially introduced by two of the senators back in 2015. The fight against the FICO score would open up markets for individuals who currently would not be able to obtain a mortgage through the existing credit score model.

The purpose of this Bill is to allow alternative credit score companies like Vantage Score Solutions to be considered by GSEs. The passing of the Credit Score Competition Act would enable Ā mortgage lenders to use companies like Vantage Score and expand mortgage lending to more creditworthy borrowers, while ensuring healthy credit standards.

So how does Vantage Score differ from the existing FICO score used to obtain mortgage loans?

  • First, Vantage Score ignores paid collections in their credit scoring model.
  • Secondly, Vantage score views alternate credit data to and reviews 24 months of activity when deriving their score.
  • Vantage was created by the three major credit bureaus: TransUnion, Experian, and Equifax, while the FICO was created by Fair Issac Corporation.
  • Mortgage lates on credit reports are viewed more heavily on Vantage Score than FICO.
  • The window for a mortgage or car credit inquiry dwindles from 45 days to 14 days on Vantage Score.
  • Vantage Score considers allowances for credit impacted by natural disasters.
  • Takes on-time payments like utilities, rent, or phone bills into consideration when formulating a Vantage Score.
  • For those with zero credit scores due to lack of credit history, Vantage Score can still post a credit score, while FICO score may take longer to post a credit score.

Although there are differences between the two scoring models, the credit score still ranges from 300-850 (850 score being the highest credit score obtainable). When it comes to increasing and maintaining a healthy score, both scoring models recommends on-time bill payments, and keeping credit balances low.

Curious to see if you qualify to buy a home? Find out how much you’re qualified to buy.