Rocket Mortgage announced that it plans to be the first home lender to make VantageScore its main credit model on Monday as influential government-sponsored loan buyers aligned VS 4.0's pricing with classic FICO's.

The nonbank mortgage giant's commitment to using VantageScore 4.0 for all eligible loans by year-end followed a social media post by Federal Housing Finance Agency Director Bill Pulte about pricing for purchase loans with it and a FICO metric, which previously was home lending's sole model. Pulte announced that pricing for both scores has been unified.

Loans that relied on VantageScore 4.0 previously had to be 20 points higher than FICO Classic to receive the same price from the government-sponsored enterprises.

READ MORE: UWM, Rocket drive early VantageScore 4.0 adoption, others lag

"We are simplifying mortgage pricing following feedback from lenders and consumers," Pulte said in a post on X. "Instead of two separate pricing grids, which makes zero sense, Fannie and Freddie are hereby moving to ONE."

FHFA rolled out VantageScore, which is backed by the three major credit reporting agencies, for lender use this year to fulfill legislatively-mandated credit modernization at the government-sponsored enterprises that the agency oversees and spur competition.

FICO's advanced credit score, 10T, also is due for enterprise and FHA adoption. The FHA plans to introduce it for underwriting in January of next year. The GSEs have released historical data to prepare for 10T but had not set a firm date for implementation at the time of this writing.

Pulte also has been looking into introducing more competition between the three credit bureaus by allowing alternatives to the traditional tri-merged report. The bureaus and score providers have introduced selective discounts but the FHFA Director has pushed for broader price cuts.

TransUnion announced an extension of its temporary 99 cent discount for VS4 through 2028 on Tuesday. Fair Isaac's stock price was down around 22% shortly after 10 a.m. on the trading day. The company has issued statements in the past indicating it welcomes competition with VS4.

What two top lenders say about VantageScore

Rocket, which has led GSE VantageScore submissions, studied 1.4 million credit reports obtained using both models and confirmed that 4.0 opened up more opportunities than classic FICO for certain buyers. It also saved some loans an average of $1,600 at closing, Rocket found.

"We did the work, compared the models and chose the one that helped more qualified clients," said Jay Bray, CEO of Rocket Mortgage, in a press release.

United Wholesale Mortgage, another leading lender who is Rocket's chief rival, also has said that its studies show VantageScore results in "better outcomes" than classic FICO around 25% of the time.

The share of loans with better outcomes could get as high as 40% by November, according to a separate UWM press release issued earlier this month.

"The addition of VS4 has been one of the best things that has come from FHFA in many, many years," President and CEO Mat Ishbia said in it. "The mortgage industry talks a lot about affordability and expanding homeownership, but this is what expanding homeownership actually looks like."

FHFA and the GSEs rolled out VantageScore to larger players first and more recently opened up the option to all lenders.

UWM and Rocket have been the two main sellers of VS4 loans to date. AmeriSave and Pennymac have sold a smaller number of such loans to the GSEs.

Considerations for lenders choosing a credit score

To get a sense of one way VS4 differs from classic FICO and 10T, consider that it generally requires just one month of payment history from a borrower. The other scores require six months of history. 

Newer scores like 4.0 and 10T also consider a broader range of payment types and data tracked for trends over time as opposed to a "snapshot" view of a borrower's credit history based on more traditional debts.

The question lenders have to ask themselves if deciding whether to use 4.0 or any score is whether they feel confident it sizes up a borrower's risk adequately and whether it will lead to any concern on the part of any end-investors in the loan if it does not meet performance expectations.

Lenders run the risk investors may ask them to repurchase a loan based on certain defects and delinquencies can be a trigger for these buybacks.

The GSEs have worked to provide mortgage companies that sell loans to them some historical data that supports score modernization such as the FICO 10T information and other external credit data which the enterprises use in pricing.

Fannie Mae and Freddie also recently released some information about their internal scores, which are used in underwriting. A Bank of America analysis found that those scores could help lenders get a better handle on delinquency risk.

Considerations in whether to adopt VantageScore include whether a company has comfort with the historical limits to the data from the newer score, which do not extend far back enough to encompass the Great Financial Crisis, a key historical indicator of performance under stress.

Advocates of the new scores say the fact that multiple leaders overseeing enterprises, which were forced into conservatorship during the GFC, have shown comfort with the modernized credit metrics after a long period of analysis is compelling. 

Influential lenders' buy-in could drive more adoption too as their loans circulate in the market.

VantageScore's use may play a role in shaping choices between the GSEs' sales and other execution options in the market as lenders weigh more heavily what the best strategy for their loans is amid a rate rise that makes origination more challenging.