Understanding VantageScore 4.0

As the mortgage industry navigates FHFA’s credit score modernization initiative, lenders are facing new questions around model choice, implementation timing, and operational readiness. With multiple scoring models approved and a phased rollout underway, understanding how each model works—and where it fits in the broader framework—has become increasingly important. As a credit and data partner that supports both FICO and VantageScore, Informative Research helps lenders evaluate these changes objectively and prepare for what comes next.

VantageScore 4.0 is a credit scoring model developed by the three nationwide credit bureaus and approved by the Federal Housing Finance Agency (FHFA) as part of its credit score modernization initiative. Alongside Classic FICO, it is included in the current lender choice framework for conventional loan delivery, representing a significant shift in how credit risk is evaluated in the mortgage market.

How VantageScore 4.0 Evaluates Credit Risk

At its core, VantageScore 4.0 leverages trended credit data, which evaluates borrower behavior over time rather than relying solely on a single point-in-time snapshot. This includes analyzing how balances change, whether payments are made consistently, and how credit utilization evolves across multiple months.

By incorporating trends, the model is designed to provide additional context around borrower behavior, particularly distinguishing between consumers who are actively improving their credit profiles and those whose risk characteristics may be worsening. This approach reflects a broader industry shift toward more dynamic credit evaluation.

VantageScore 4.0 is also structured to score certain consumers with limited or thin credit histories when sufficient data exists, potentially expanding scoreability across portions of the borrower population that may otherwise be difficult to evaluate using traditional models.

Treatment of Medical Debt

One of the most frequently discussed aspects of VantageScore 4.0 is its treatment of medical collection debt. The model does not include medical collections in its scoring calculations. This approach aligns with broader changes in credit reporting practices and reflects evolving industry perspectives on the predictive value of medical debt in assessing long-term mortgage performance.

It is essential to recognize that changes related to medical debt are influenced not only by scoring model design but also by credit reporting standards that determine what information appears on consumer credit reports across all models.

Role Within the GSE Framework

FHFA has approved VantageScore 4.0 for use as part of an interim lender choice phase. Under this framework, lenders will be able to choose between Classic FICO and VantageScore 4.0 for conventional loan delivery once the Enterprises complete final operational steps and update their Selling Guides.

Until those updates are finalized, existing delivery requirements remain in place. FHFA has also indicated that, initially, the Enterprises will accept one credit score model per loan, underscoring the need for lenders to align credit policies, underwriting workflows, and investor strategies accordingly.

Considerations for Lenders

Adopting or evaluating VantageScore 4.0 involves more than simply selecting a scoring model. Lenders should consider:

• How the model aligns with their borrower demographics
• The impact on credit policy, overlays, and eligibility thresholds
• Secondary market execution and investor expectations
• Technology readiness and vendor integrations

As a neutral credit and data provider, Informative Research supports lenders that work with all approved credit scoring models, helping teams evaluate how each fits within broader underwriting, compliance, and risk management strategies.