Your Credit Score Could Change How Much You Pay For A Home

New mortgage credit-scoring models could give more prospective homeowners a fuller picture of their financial history.

For years, prospective homeowners have been told to keep their credit score in mind. Now, that number is getting a makeover, and the changes could have major implications for people trying to buy a home.

The Federal Housing Finance Agency has approved newer credit-scoring models, including VantageScore 4.0 and FICO 10T, for use in the mortgage market. Unlike older scoring approaches, the newer models can incorporate a broader view of a consumer’s financial behavior, including eligible rental-payment history and trends in credit balances.

That shift matters because traditional credit scores do not always capture the full financial picture of consumers who pay their bills consistently but have limited or nontraditional credit histories.

For Black Americans and other consumers who have historically faced barriers to homeownership, evolving mortgage underwriting could be particularly significant. Pew Charitable Trusts reports that 37.5% of Black mortgage borrowers surveyed from 2013 to 2023 had credit scores between 600 and 699, compared with 19.5% of all mortgage borrowers.

Mortgage lending has also become increasingly concentrated among borrowers with higher credit scores. Pew found that lenders originated 1.08 million home-purchase mortgages in 2000 for borrowers with scores between 601 and 660. By 2024, that figure had fallen to 293,000.

The newer models are designed to capture more information instead of relying primarily on a snapshot of a borrower’s credit history.

That could benefit consumers whose financial habits are stronger than their traditional credit scores suggest. Experian says newer mortgage scoring models can incorporate positive rental-payment history and other eligible data. The company’s research found that 41% of consumers surveyed were already aware that mortgage lenders were transitioning toward models that incorporate rent and utility payments.

Still, a new scoring model does not mean every lender will immediately offer better terms to every borrower. Mortgage approval also depends on factors including income, debt, employment history, down payment, and the lender’s underwriting standards.

For prospective buyers, the change makes one thing especially important: knowing which credit model a lender uses.

As mortgage underwriting evolves, consumers may have more reason to shop lenders — not just for an interest rate, but for how their financial history is evaluated.