Mortgage giant Fannie Mae is set to drop its longstanding credit score minimum later this month
The government-sponsored enterprise announced last Wednesday that as of Nov. 16, it will no longer require a minimum FICO score of 620 for borrowers. Instead, the enterprise will "rely on its own comprehensive analysis of risk factors to determine eligibility."
Previously, borrowers with a FICO score below 620 would be automatically rejected from Fannie Mae's underwriting system. Under the new guidelines, though, borrowers, especially first-time homebuyers, could gain access to greater financing options.
Bill Pulte, director of the Federal Housing Finance Agency, which serves as a conservator of Fannie Mae, said in a post on X that the rule change won't affect the enterprise's underlying underwriting standards. Instead, it creates more leeway for different types of scores to be considered.
"As a process matter, to ensure two scores can be used and not just one, we eliminated requirement for FICO in the infamous 'guide'," Pulte said in a Nov. 7 post. "Big deal for consumers. Small or nothing deal for underwriting."
Officials say they're easing barriers to borrowing
It's just the latest in a series of policy changes aimed at creating homeownership opportunities in the United States.
In July, the FHFA directed both Freddie Mac and Fannie Mae to take a "lender choice" approach when it comes to credit scores. As government-sponsored enterprises, Freddie Mac and Fannie Mae support the housing market by buying up mortgages from lenders.
The policy change opened the door for the government-sponsored enterprises to also consider the VantageScore, another credit score model. Previously, the enterprises could consider scores only from FICO, or the Fair Isaac Corporation, whose credit score model dominated the market for years.
At the time, Pulte said in a social media post that the integration of VantageScore was a way to expand "credit access to millions of forgotten Americans — people who live in rural areas, renters who pay their rent on time every month — and bringing down closing costs."
On Monday, Pulte wrote in another post that the FHFA was in talks with FICO to adopt its newest credit score model, FICO 10T.
"This would be great for consumers and the safety of the mortgage market to have both FICO 10T Score and Vantage Score 4.0," he wrote.