Industry win: FHFA keeps tri-merge credit score infrastructure intact

In a move that will help the credit union industry, the Federal Housing Finance Agency (FHFA) announced it will permit financial institutions selling loans to Fannie Mae and Freddie Mac—the government-sponsored enterprises (GSEs) to use VantageScore 4.0. This announcement halts the transition to a new credit scoring requirement that would have forced credit unions into costly system rewrites, vendor re-contracts, and extensive retesting. 

“Today’s announcement is welcome flexibility for credit unions and the members they serve. By keeping the tri-merge credit report and allowing—but not requiring—the use of VantageScore 4.0, FHFA has helped avoid costly system overhauls while opening the door to more inclusive credit access," said America's Credit Unions Chief Advocacy Officer Carrie Hunt. "This thoughtful step reduces near-term compliance burdens, preserves vendor competition, and creates new opportunities to responsibly serve communities whose credit scores may skew lower. We’ll continue working with FHFA to ensure that any future credit score changes support fairness, innovation, and the operational realities of community-based lenders.”

Impacts for credit unions include: 

• Lower near-term compliance costs: Existing loan-origination and secondary-delivery pipes can continue to flow with minimal IT work because the credit report format is unchanged and use of VantageScore is optional rather than mandatory;

  Pricing leverage on credit-report vendors: Credit unions may use competition between FICO and VantageScore to negotiate lower per-file fees—an important consideration for smaller institutions that lack large loan volumes;

• Potential expansion of membership access: VantageScore 4.0 incorporates rental, telecom, and utility data and weights recent performance more heavily, which can lift scores for “thin-file” or historically under-scored borrowers, segments many credit unions actively try to serve; and

  Policy and risk-management adjustments: If a credit union chooses to adopt VantageScore, it will have to revise its underwriting guidelines, risk-based pricing curves, fair-lending analysis, and secondary-market representations to account for the different score distribution.