VantageScore 4.0 shows improved mortgage risk prediction

VantageScore reports that its 4.0 model demonstrates superior predictive capabilities for mortgage risk compared to previous versions and benchmark credit scores. The company attributes this performance to the use of trended credit data, which analyzes consumer payment and balance management over time rather than relying on a single snapshot. The model also utilizes four times as much data as legacy scores and aims for consistency across Equifax, Experian, and TransUnion through a proprietary attribute-leveling process.

As the mortgage industry transitions toward these newer models, government-sponsored enterprises Fannie Mae and Freddie Mac have updated their Private Mortgage Insurer Eligibility Requirements (PMIERs) to include VantageScore 4.0. Under guidance from the Federal Housing Finance Agency (FHFA), mortgage insurers will be required to maintain larger safety nets for loans originated using VantageScore 4.0 compared to those using Classic FICO. For example, on a $300,000 loan with an 85% loan-to-value ratio, an insurer might need to hold significantly more in required assets for a VantageScore loan than for a comparable Classic FICO loan, depending on the borrower's credit score.