Credit Scores Lose Grip As Gatekeeper In Mortgage Approval Process: Here's Why

A major shift in how lenders judge borrowers means your credit score may soon matter less and your overall financial story more when you apply for a mortgage.

Fannie And Freddie Loosen Score-Driven Loan Rules

Fannie Mae, early last week, removed its minimum credit-score requirement for most loans run through its automated Desktop Underwriter system, allowing approvals based on broader data like payment history and income instead of a hard 620 cutoff.

Freddie Mac, meanwhile, has already allowed its Loan Product Advisor to approve borrowers with no usable credit score when they can document strong alternative histories, such as on-time rent and utility payments.

At the same time, federal regulators have cleared Fannie and Freddie to move from the old FICO models to newer FICO 10T and VantageScore 4.0, which can incorporate "trended" data and some alternative information like rent and telecom bills.

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Why Are Lenders Loosening Credit Score Rules?

The Federal Housing Finance Agency says the change should give a more accurate view of risk and expand access to credit for millions of consumers with thin files.

These moves target a real pain point. Research using federal Home Mortgage Disclosure Act data finds that credit history and debt-to-income ratio are among the most common reasons lenders cite for denying mortgages.

Other studies show that traditional scoring can wrongly price risk. A recent 2025 analysis by professors at Gies College of Business in Illinois found women receive scores 6–8 points lower than comparable men despite equal or better default rates, highlighting "widespread bias and inefficiency in credit scoring and mortgage lending."

So What Does This Mean For Your Mortgage?

• More ways to qualify. If you've paid rent, utilities or phone bills on time but have little or imperfect credit card history, automated systems are more likely to give you full credit for that behavior.

• Thin-file borrowers get a real shot. First-time buyers, immigrants and gig workers, people who often struggle to generate a high traditional score, may see fewer automatic denials and more approvals based on verified income and cash flow.

• But standards aren't disappearing. Lenders still must follow "ability-to-repay" rules and can add their own overlays, so you'll still need stable income, manageable debts and some documented payment history. Riskier profiles may face higher rates or extra documentation instead of an outright "yes."

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