First-of-Its-Kind Independent Study Finds VantageScore 4.0 Produces Superior Mortgage Risk Differentiation Compared to FICO

• VantageScore 4.0 Delivers 41% Better Risk Differentiation During Macroeconomic Stress Periods
• Study Disproves the Myth of “Mortgage Credit Score Gaming” Because VantageScore 4.0 Consistently Outperforms FICO

SAN FRANCISCO--(BUSINESS WIRE)--A new analysis of loan-level data from both Fannie Mae and Freddie Mac reveals that VantageScore 4.0 consistently better rank-orders mortgage borrower risk and also better separates risk than FICO. The analysis published by independent research firm Prosperity Now, titled “From Scores to Signals: Understanding Risk Classification in a Multi-Score Mortgage Market,” evaluates the performance of VantageScore 4.0 against the incumbent credit score across a ten-year period, including the COVID-19 stress environment, with a focus on how each model aligns with observed loan outcomes and real-world market conditions.

“The results are clear: VantageScore 4.0 delivers a more accurate view of borrower risk, especially during stress periods,” said Dr. Rikard Bandebo, EVP, Chief Strategy Officer and Chief Economist at VantageScore. “The study also finds that there is no ‘gaming’ risk added with the two-score system, which will be a massive benefit for investors and the GSEs.”

Key study findings include:

• VANTAGESCORE 4.0 DELIVERS SUPERIOR RISK DIFFERENTIATION, ESPECIALLY IN TIMES OF STRESS: VantageScore 4.0 demonstrates stronger separation between higher- and lower-risk borrowers, with approximately 41% greater differentiation at the decile level under stress conditions. This enhanced precision is particularly evident at the top of the score distribution, where the lowest-risk borrowers show meaningfully better post-forbearance performance.

• GAMING IS OFF THE CARDS AS DIFFERENCE IN SCORES IS ONE SIDED: The analysis found that when mortgage loans had a high FICO score and VantageScore 4.0 scored them low, VantageScore correctly identified the loans as much riskier. When mortgage loans had a high VantageScore 4.0 and a low FICO score, they had the same risk on average. Therefore, mortgage credit scoring gaming is a myth, as VantageScore 4.0 consistently identifies mortgage credit risk more accurately.

• VANTAGESCORE 4.0 BETTER PREDICTS REAL-WORLD DEFAULT OUTCOMES, INCLUDING POST-FORBEARANCE PERFORMANCE: The analysis shows that VantageScore 4.0 more effectively aligns borrower scores with observed loan performance, particularly in economic periods where borrower risk may be temporarily masked. During the COVID-19 period, while forbearance programs suppressed default reporting, VantageScore 4.0 was much more predictive of whether loans in forbearance would subsequently default when payments resumed.

To download a full copy of the Prosperity Now study, visit https://www.prosperitynow.org/news-and-insights/from-scores-to-signals-understanding-risk-classification-in-a-multi-score-mortgage-market.

Mortgage lenders are encouraged to explore the benefits of VantageScore 4.0 by visiting the VantageScore Mortgage Resource Center. Lenders and partners interested in adopting VantageScore models or participating in pilot programs can contact their credit bureau representatives:

Equifax: [e-mail]
Experian: [e-mail]
TransUnion: [e-mail]

About VantageScore®

VantageScore is the fastest-growing credit scoring company in the U.S., and is known for the industry’s most innovative, predictive and inclusive credit score models. In 2024, usage of VantageScore increased by 55% to hit 42 billion credit scores. More than 3,700 institutions, including nine of the top 10 U.S. banks, use VantageScore credit scores and digital tools to provide consumer credit products or generate greater insights into consumer behavior. The VantageScore 4.0 credit scoring model scores 33 million more people than traditional models. With the FHFA allowing the immediate use of VantageScore 4.0 for Fannie Mae and Freddie Mac guaranteed mortgages, the company is also ushering in a new era for mortgage lending.

VantageScore is an independent joint venture company owned by Equifax, Experian and TransUnion.