VantageScore Study Fuels Growing Clash With FICO in Mortgages

VantageScore recently reported that its 4.0 credit scoring model significantly outperformed Classic FICO in a large-scale head-to-head mortgage comparison.

Drawing on Fannie Mae’s Single-Family Loan Performance database, the study evaluated more than 20 million fixed-rate, first-lien mortgages originated from 2013 to 2023.

The report identified nearly half as many mortgage defaults as Classic FICO leading into the COVID-19 crisis. Across the entire 10-year dataset, VantageScore delivered up to 3.8% predictive lift and identified 13% more defaults overall.

This comes only a month after Federal Housing Finance Agency Director Bill Pulte announced mortgage lenders could begin using VantageScore 4.0. A week later, FICO released a white paper, saying its latest model FICO® Score 10 T “overwhelmingly outperforms VantageScore 4.0 in mortgage origination predictive power.”

It’s safe to say the rivalry is heating up between credit models, and the stakes are high.

How VantageScore 4.0 Compares to FICO

In this most recent study, VantageScore 4.0 flagged 11% more high-risk borrowers than Classic FICO in both good and bad economic times, indicating better risk identification that can aid lenders in avoiding costly defaults.

“Our unique, loan‑level analysis confirms the findings of multiple third‑party independent studies — VantageScore 4.0 offers superior predictive performance over Classic FICO,” said Dr. Andrada Pacheco, Chief Data Scientist at VantageScore.

At the crucial 620 credit score threshold — the point for GSE-backed mortgages — VantageScore showed a 6.5% default rate among borrowers it included, compared with 10.1% for those it excluded. That suggests the model could expand credit access while helping lenders avoid higher-risk loans.

VantageScore 4.0 is the first mainstream scoring model to incorporate trended data and alternative data sources such as rent, utility, and telecom payments. Adoption of the model jumped 55% in 2024 to 42 billion scores used across the credit ecosystem. It’s also used by over 3,700 institutions, including eight of the 10 largest U.S. banks.

The Path to Mortgage Approval

The report follows VantageScore’s longtime quest for inclusion as a GSE-approved credit score option.

As BadCredit.org has reported, the FHFA’s gradual implementation of VantageScore has faced pushback from traditional credit reporting incumbents and mortgage industry groups but offers expanded opportunity for underserved consumers.

After facing initial resistance, the FHFA has moved to include VantageScore with FICO in the GSE approval process.

Implications for Lenders and Consumers

Classic FICO, which relies on older data structures, remains the dominant model for mortgage underwriting but does not account for modern payment behaviors. Meanwhile, VantageScore 4.0 is gradually being adopted for GSE mortgage underwriting.

For subprime lenders and credit scorers, the findings underscore how models that capture rent and utility data may offer better visibility into nontraditional borrowers.

For mortgage lenders and credit scoring professionals, the new data bolsters the case for rethinking the current scoring status quo. Whether that leads to faster GSE adoption or changes in underwriting policies remains to be seen — but the momentum is clearly building behind alternative models like VantageScore 4.0.