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FICO’s agreement removes final barrier for implementing more modern, inclusive credit scoring models at Fannie Mae and Freddie Mac

The Federal Housing Finance Agency (FHFA) and Fair Isaac and Company (FICO) have reached an agreement to release crucial historical data for the FICO Score 10T model. This is a major breakthrough that clears the final obstacle to the mandated adoption of new, more inclusive credit scoring models for loans sold to Fannie Mae and Freddie Mac (the GSEs).

Key Steps in the Transition

  • Final Data Release: FICO has agreed to provide the GSEs with historical data for the FICO Score 10T model. FHFA Director William Pulte described this development as “Huge!”.

  • Market Analysis: The three credit bureaus will soon deliver the FICO Score 10T datasets to the GSEs. This data, which will include files updated through 2025, is critical for lenders, investors in mortgage-backed securities (MBS), and risk modelers to perform necessary testing and ensure compliance.

  • Mandated Models: The FHFA previously validated and mandated the eventual transition away from the older FICO Classic score to both FICO Score 10T and VantageScore 4.0.

  • Inclusive Scoring: Both new models are designed to expand credit access by incorporating alternative data, such as rent, utility, and telecom payments, for a more accurate assessment of creditworthiness.

  • Implementation Timeline: While historical data for VantageScore 4.0 was released in July 2024, the FICO data release was delayed by disagreements. The full implementation of FICO 10T is expected to be a multi-year effort.

This agreement marks a significant step toward a more competitive and inclusive mortgage credit scoring environment.