CThe government-sponsored mortgage giants, facing pressure to end their reliance on old credit-scoring models from Fair Isaac Corp., are working with their regulator to study newer alternatives. Fannie Mae and Freddie Mac recently confirmed the commitments. That would be a great victory for VantageScore Solutions, a competitor to FICO that has struggled to gain a foothold in the mortgage-origination business.

VantageScore contends that the question of which credit-scoring models get a seal of approval from Fannie and Freddie is more than a run-of-the-mill business dispute, because it has implications for the availability of U.S. mortgage credit.

According to Credit Card Forum ‘s blog, FICO breaks down its credit score as: 35%, payment history; 30%, amounts owed; 15%, length of credit card history; 10%, new credit; and 10%, types of credit used.

FICO announced in August it would stop including records of a consumer failing to pay a bill if the bill has been paid or settled with a collection agency, and that it will give less weight to unpaid medical bills that are with a collection agency ( News NowAug. 11).

VantageScore does not provide an exact breakdown but lists payment history as “an extremely influential factor;” age, credit type and percentage of credit card limit used as “highly influential factors;” total balances and debt as “moderately influential factors;” and recent behavior, inquiries and available credit as “less influential factors.”

Credit Card Forum cites a recent court filing claiming VantageScore has approximately a 5.7% market share, compared with FICO’s estimated 90%.

The National Mortgage News report states that, since Fannie and Freddie loans currently count as qualified mortgages, which are considered safer loans, the enterprises’ underwriting guidelines “serve as industry-wide standards.”   The enterprises will study the latest versions of each–VantageScore 3.0 and FICO Score 9.

About: VantageScore is an independently managed firm that maintains, revalidates and updates the scoring model, and educates lenders, consumers and regulators about its benefits.  VantageScore is committed to providing greater score accuracy and consistency so that lenders and consumers alike can make credit decisions with a higher level of confidence.  VantageScore was formed in 2006 and is a joint venture of Equifax, Experian and TransUnion.

Source: National Mortgage News and CUNA