The conservator and regulator of two influential government-related mortgage investors has announced a credit score other than FICO’s “classic” metric can be used when submitting loans to them.

Effective immediately, Fannie Mae and Freddie Mac will allow lenders to use VantageScore 4.0, Bill Pulte said in an X post referencing one of two advanced credit metrics the two government-sponsored enterprises have been working on adding to fulfill a legislative mandate.

The move, which Pulte said is “consistent with President Trump’s landslide mandate to lower costs” challenges FICO, but it strengthens the position of three separate credit bureaus that provide mortgage-related reports and collaboratively formed VantageScore.

“We applaud Director Pulte’s decision to allow the VantageScore 4.0 credit score for all Fannie and Freddie mortgages pursuant to the 2018 Credit Score Competition Act,” said Silvio Tavares, president and CEO of VantageScore, in an emailed statement.

Pulte, who has said he plans to conduct a “full-scale review” of the three credit bureaus, indicated that for now Fannie and Freddie would be keeping tri-merged reports from them, noting this meant there would be “no current requirement to build new architecture.”

One concern raised in response to an earlier Biden administration plan to lower costs by reducing the number of reports was the need to change industry operations that had been designed to accommodate three reports.

A group of Republican legislators also expressed concerns about eliminating the tri-merge requirement, citing conflicting data on whether the change could have an unduly adverse impact on some borrowers.

A more advanced credit metric like VantageScore’s 4.0 is intended to bring in a broader range of data, resulting in a more sophisticated analysis of would-be borrowers’ ability to repay in ways that could mean more people will be qualified for Fannie and Freddie’s lower-rate loans.

“Modern credit scores like VantageScore that use both credit report data and alternative data, including rental payments, are long overdue for use in the mortgage industry. VantageScore has already been broadly adopted in other credit industries,” Tavares said.

FICO also has an advanced score that Fannie Mae and Freddie Mac’s regulator had planned to adopt prior to Bill Pulte’s appointment to lead it.

The X post about VantageScore did not mention FICO. There was no immediate response to an inquiry sent to the Federal Housing Finance Agency, which Pulte has renamed U.S. Federal Housing.

The VantageScore announcement impact

FICO stock, which had been approaching $1,900 per share, had fallen more than 14% on the day at the time of this writing on Tuesday to a level closer to $1,700. It had dropped to a level as low as $1,500 in late May after Pulte voiced concerns about its score’s costs before rebounding.

Share prices for each of the three major credit bureaus were generally higher on the day at deadline with Equifax up a little under 1%, Experian rising by more than 1%, and Transunion increasing 3%.

The extent of any cost savings from the two government-sponsored enterprises adopting VantageScore 4.0 will depend on how much competition they allow, said Curtis Knuth, president and CEO of NCS, a consumer reporting agency.

If lenders can choose between the new score and a comparable metric like FICO’s 10T, and if advanced scores make it safer to approve more of the borrowers they aim to serve, that competition could drive score prices down, he said.

A move away from a tri-merge would have had some operational complexities but the work involved in adding an advanced score is most likely to be contractual, Knuth added.

“I think for the most part the industry should be ready,” he said. “Lenders that don’t have experience with a new model are going to have to get it.”