NASHVILLE, Tenn.—The FICO score’s years-long hold on the mortgage market is coming to an end.
The Federal Housing Finance Agency said Monday that it will require lenders that use credit scores for mortgage underwriting to use scores from both
Fair Isaac Corp.
, the creator of FICO credit scores, and its competitor VantageScore Solutions LLC.
Until now, mortgage lenders had to gauge most borrowers using only FICO scores if they wanted to sell a loan to
That requirement helped cement FICO’s dominant position as the go-to credit score for lenders for a variety of loans. Since lenders had to use FICO scores for many mortgages, they also made them the favored third-party credit score when underwriting car loans, credit cards and other consumer loans. This also helped secure FICO scores as the main credit score used in the securitization market.
The FHFA, Fannie Mae and Freddie Mac began a review of whether to change credit score requirements in 2014. Consumer advocates, VantageScore and some mortgage lenders had pushed for the change, saying it would allow more people to get approved for mortgages.
The FHFA said in a statement that it expects the change “will be a multiyear effort.”
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