FHFA keeps tri-merge credit score infrastructure intact

In a move that will help the credit union industry, the Federal Housing Finance Agency (FHFA) announced it will permit financial institutions selling loans to Fannie Mae and Freddie Mac—the government-sponsored enterprises (GSEs) to use VantageScore 4.0. This announcement halts the transition to a new credit scoring requirement that would have forced credit unions into costly system rewrites, vendor re-contracts, and extensive retesting.  

Impacts for credit unions include:  

• Lower near-term compliance costs: Existing loan-origination and secondary-delivery pipes can continue to flow with minimal IT work because the credit report format is unchanged and use of VantageScore is optional rather than mandatory; 

• Pricing leverage on credit-report vendors: Credit unions may use competition between FICO and VantageScore to negotiate lower per-file fees—an important consideration for smaller institutions that lack large loan volumes; 

• Potential expansion of membership access: VantageScore 4.0 incorporates rental, telecom, and utility data and weights recent performance more heavily, which can lift scores for “thin-file” or historically under-scored borrowers, segments many credit unions actively try to serve; and 

• Policy and risk-management adjustments: If a credit union chooses to adopt VantageScore, it will have to revise its underwriting guidelines, risk-based pricing curves, fair-lending analysis, and secondary-market representations to account for the different score distribution.