New Scoring Models will be a Boost for Rent Reporting
Fannie Mae and Freddie Mac’s Implementation of FICO 10T and VantageScore 4.0 is a Boost for Rent Reporting: A Call to Provide Stakeholder Feedback
Currently, while rental payment data that is reported to the credit bureaus is visible on credit reports, that data is only factored into the newer scoring models – FICO 9 and 10/10T and VantageScore 3.0 and 4.0. This means that when a renter participating in rent reporting applies for a loan, it is likely that the lender is using an older credit scoring model, and the renter will not see the improvement to their credit score reflected. This can be confusing for renters and affordable housing providers alike. Widespread adoption of these newer scoring models would accelerate the reach and impact of rent reporting as a credit building tool.
Last year, the Federal Housing Finance Agency (FHFA) announced their support for Fannie Mae and Freddie Mac to use both FICO 10T and VantageScore 4.0 in underwriting. Fannie Mae and Freddie Mac released a Partner Playbook in March that describes how and when they will transition from using the Classic FICO model to implementing both FICO 10 T and VantageScore 4.0 during underwriting.
CBA supports the smooth and transparent transition to these new scoring models because of the benefit it will provide those living in affordable housing who are building their credit through rent reporting. Any improvements to their credit score due to rent reporting would be more widely seen by lenders. Transparently moving to newer scoring models can reduce confusion about the impact that rent reporting has on credit reports and credit scores. A rollout that acknowledges the need for consumer education on the technical side of credit scoring models can help affordable housing providers that do not have the capacity to provide this content inform their renters, reduce the mistrust of housing providers, and encourage rent reporting.
To that end, CBA’s Rent Reporting team is encouraging all stakeholders to read FHFA’s Fact Sheet and Fannie Mae and Freddie Mac’s Partner Playbook, as well as to fill out this stakeholder engagement survey before May 31st.