VantageScore 4.0 available for use in VA loans

As more investors opt to accept VantageScore 4.0, the company behind the model is making it known that the Department of Veterans Affairs is taking the scorecard for its mortgage guarantee program.

The VA does not have a credit score requirement. At least one VA lender, Cardinal Financial, said it is using the advanced scorecard from VantageScore's rival FICO, the 10T model. That is a sign that the VA is willing to accept loans using these more current metrics than the standard for the industry, Classic FICO.

Currently, the Federal Housing Finance Agency, Fannie Mae and Freddie Mac are working on incorporating VantageScore 4.0, as well as FICO 10T, into their automated underwriting systems. FHFA Director Sandra Thompson announced the initiative at the Mortgage Bankers Association annual convention in 2022.

Plus, a pair of Federal Home Loan Banks, Chicago and San Francisco, are accepting the VantageScore 4.0 model on collateral submitted. Last week, politicians called on the FHLBank-New York to adopt models like VantageScore 4.0 as a way to advance housing opportunities for underserved communities.

The most recent Mortgage Bankers Association Weekly Application survey found VA mortgages had a 16.8% share for the week ended Aug. 9, more than the Federal Housing Administration program at 13.5%. Optimal Blue rate lock data for Aug. 13 has an opposite order, with FHA's share at 21% and VA's at 11%.

The VA mortgage program is part of the benefits the U.S. government provides for both active duty and former military personnel. But the traditional credit scoring models exclude people who activity has been dormant for six months. That impacts current duty personnel who are on or after their deployments, VantageScore said.

The 4.0 model eliminates that six-month requirement, and also integrates rental payments and other consumer credit data.

"Outdated credit scoring models unfairly exclude many veterans from fair pricing in the financial marketplace," said Tony Hutchinson, senior vice president of industry and government relations at VantageScore, in a press release. "VantageScore enables more veterans and active-duty military to access the financial products they need, including home loans."

The company said its model is able to score 33 million more consumers and that lenders could originate 2.7 million additional mortgages.

Earlier this week, the Consumer Financial Protection Bureau closed a comment period on a proposal that would remove most medical bills from credit reports.

Since the FHFA announcement, VantageScore has received an increase in the number of inquiries from mortgage lenders on adopting the 4.0 model for use.

In July, Fannie Mae and Freddie Mac released loan data for a 10-year period to help lenders navigate the transition to the VantageScore 4.0 and FICO 10T models.