We Said Competition Would Lower Mortgage Costs. Now Let’s Prove It.

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For years, the mortgage industry has complained about the rising cost of pulling credit.

Those complaints weren’t imaginary.

The Mortgage Bankers Association told Congress earlier this year that its members had experienced four consecutive years of significant increases in mortgage credit-reporting costs, in some cases totaling as much as 350%. MBA said 2026 alone brought another 40% to 50% increase in pricing for some lenders.

Now something important has changed.

On September 4, Federal Housing Finance Agency Director Bill Pulte directed Fannie Mae and Freddie Mac to approve all lenders to use VantageScore 4.0 for loans sold to the government-sponsored enterprises. The move expands a rollout that had reached 50 lenders and introduces meaningful competition into a part of mortgage lending that relied on Classic FICO for decades.

I think competition is a good thing.

But now comes the part that matters.

We need to prove that borrowers benefit from it.

This shouldn’t become a fight over whether someone is on Team FICO or Team VantageScore. Mortgage lenders don’t exist to referee a corporate rivalry between credit-scoring companies. Our responsibility is to determine whether a system accurately evaluates risk, gives qualified borrowers a fair opportunity to obtain financing and does so at a reasonable cost.

If competition improves those things, then the industry should embrace it.

And if it lowers the cost of originating a mortgage, some of that benefit should eventually be visible to the person paying for the mortgage.

That is the test I think we should apply.

FHFA has been working toward this moment for years. In 2022, the agency validated and approved VantageScore 4.0 and FICO Score 10T for use by Fannie Mae and Freddie Mac after the models went through the agency’s review process. FHFA said both models exceeded its required thresholds for accuracy, reliability and integrity.

More recently, FHFA moved into an interim implementation phase that allowed approved lenders to deliver GSE loans using either Classic FICO or VantageScore 4.0. The September directive dramatically broadens that opportunity by directing the enterprises to approve all lenders for VantageScore use.

There is an important distinction here.

This does not mean every mortgage lender is suddenly required to abandon FICO. Classic FICO remains an approved model. FICO 10T has also been approved and is expected to become available for GSE loan delivery at a later stage. For now, the change gives lenders another option.

That option matters because mortgage credit reporting has become expensive.

MBA told Congress that the persistent lack of competition in mortgage credit reporting and scoring had contributed to rising costs for borrowers and lenders. Those costs don’t disappear simply because they occur before closing. Someone pays for them.

Sometimes that’s the lender. Sometimes it’s the borrower. Ultimately, costs embedded in originating mortgages have to be accounted for somewhere in the economics of making a loan.

This is where I think we need to be careful with some of the numbers being thrown around.

TransUnion announced in March that it would price a VantageScore 4.0 mortgage-origination score at 99 cents. The company estimated that its pricing could create more than $900 million in potential savings for lenders and consumers.

That’s significant.

It is also a company estimate.

And a 99-cent credit score does not mean a 99-cent mortgage credit report.

A mortgage credit report involves considerably more than the royalty associated with the scoring model. There are bureau data costs, reseller costs and other expenses associated with assembling and delivering the information lenders use.

That’s why I don’t think the industry should promise consumers some enormous overnight reduction in closing costs based simply on the advertised price of one score.

But the opposite argument doesn’t work either.

If genuine competition substantially reduces one of the costs inside the mortgage-credit system, we should eventually be able to identify where those savings went.

Maybe they reduce what consumers are charged for credit.

Maybe lenders absorb them while other origination expenses continue increasing.

Maybe competition forces pricing changes elsewhere in the credit-reporting ecosystem.

Or perhaps the greatest consumer benefit won’t come from the cost of the score at all.

It may come from who can be scored.

One reason newer credit models have attracted so much attention is their use of additional information, including trended credit data and rental-payment history. FHFA says the newer models were approved after its validation process, and the agency and enterprises have made historical credit-score data available so market participants can evaluate how the models perform.

VantageScore argues that its model can identify millions of additional creditworthy consumers and generate substantial savings across the mortgage market. Those are meaningful claims, but they remain claims from the company selling the model. The mortgage industry should measure the actual results as adoption expands.

How many borrowers who previously could not be scored can now be evaluated?

How many actually qualify for a mortgage?

What happens to their pricing?

And, most importantly, how do those loans perform?

Those answers will tell us much more than a press release will.

Credit access matters to me. I have spent much of my career arguing that responsible lending and expanded access to homeownership are not opposing ideas.

But expanding the number of people who receive a score is not the same as expanding responsible homeownership.

A credit score is one part of mortgage underwriting. Income still matters. Debt still matters. Assets matter. The property’s value matters. The borrower’s ability to repay matters.

And the price of the house certainly still matters.

A different credit score cannot fix a housing market where a qualified borrower simply cannot afford the monthly payment.

That doesn’t diminish the importance of this change. It puts it in the proper context.

There is another part of the credit system that deserves scrutiny as this transition moves forward: how many credit bureau reports are actually necessary.

FHFA’s current credit-score implementation does not, by itself, eliminate the existing credit-reporting framework. FHFA has also previously approved a future transition from the traditional tri-merge approach toward requiring credit reports from two rather than three nationwide consumer reporting agencies, although implementation plans have changed over time.

That conversation is worth having.

Not because three reports are automatically unnecessary. Information can differ among Equifax, Experian and TransUnion, and eliminating one source of information could create risks that have to be understood.

But “we have always done it this way” isn’t enough justification either.

Every requirement in the mortgage process should be able to answer a simple question: What risk does this protect against, and is the benefit worth what we’re asking the borrower to pay for it?

If three bureau reports materially improve underwriting outcomes, demonstrate that.

If two can provide comparable protection at a lower cost, demonstrate that instead.

The same standard should apply to credit scoring.

FICO should compete on predictive performance, reliability, price and the value it provides to lenders, investors and borrowers.

VantageScore should have to do exactly the same thing.

FICO 10T should face that test when its broader GSE implementation arrives.

Nobody should win simply because their model has always been there, and nobody should win merely because theirs is cheaper.

The winner should be the model—or models—that best identify creditworthy borrowers while preserving the safety and soundness of the mortgage system at a competitive cost.

That is what competition is supposed to accomplish.

And there is one more group that should win.

The borrower.

For years, housing professionals have talked about affordability while the cost of almost every part of buying and financing a home has increased. We cannot control every one of those costs. We aren’t going to solve the housing shortage by changing a credit score.

But when we finally create competition in an area where the industry has been asking for it, we should measure what happens next.

Track the cost of mortgage credit reports.

Track how many previously unscorable consumers become mortgage-ready borrowers rather than merely newly scorable consumers.

Track loan performance.

Track whether lenders are actually able to originate more efficiently.

And track whether consumers see any measurable benefit.

If the answer is yes, we’ll have evidence that credit-score competition worked.

If the answer is no, we should be willing to ask why.

After years of arguing that competition would help lower the cost of obtaining a mortgage, we finally have an opportunity to test that proposition.

Now let’s prove it.