Oct 14, 2026
Since September 2026, every lender that sells loans to Fannie Mae and Freddie Mac can choose VantageScore 4.0 instead of the Classic FICO scores (FICO 2, 4 and 5) that mortgages have used for about 20 years. Both models now share one pricing chart, so a 680 is priced as a 680 whichever model produced it.
For most borrowers with long, clean credit histories, the two scores land close together. The people who should pay close attention are the ones Classic FICO scores low, or not at all, for reasons VantageScore 4.0 treats very differently: medical collections, old paid-off collections, short credit histories, and how credit card balances are read.
Why the score still decides so much: Fannie Mae dropped its hard 620 minimum for loans run through its automated system in November 2025. But many lenders and mortgage insurers still set their own minimums, often 620 or higher, and the score sets the price a borrower pays. A borrower who lands under a lender’s cutoff on FICO, or one pricing tier lower, can be declined or pay thousands more over the life of the loan. Choosing the model that scores the borrower accurately can change both outcomes.
Medical collections: counted by FICO 2, 4 and 5, ignored by VantageScore 4.0
This is the clearest difference between the two models. Classic FICO treats an unpaid medical collection exactly like an unpaid credit card in collections. VantageScore 4.0 leaves medical collections out of the score entirely, paid or unpaid.
The credit bureaus already remove some medical debt on their own: paid medical collections, those under $500, and those less than a year old. A federal rule that would have removed medical debt from credit reports altogether was struck down in 2025. That leaves the larger, older, unpaid bills, which are exactly the ones that hurt a Classic FICO score most.
Example: A borrower had an emergency room visit in 2023. Insurance denied part of the claim, and a $2,400 balance went to collections while she was disputing it. Her other accounts have been paid on time for years. On Classic FICO, that collection can pull her below her lender’s cutoff. On VantageScore 4.0, it doesn’t count at all.
Non-medical collections are a different story. An unpaid collection for a credit card, phone bill or utility still hurts under both models.
Utilization and trended data: a snapshot vs. the whole story
Utilization is the share of your credit card limits you are using. It is one of the biggest factors in both models, so high balances hurt under either one. The difference is how each model reads those balances.
- Classic FICO takes a snapshot. It sees only the balance on the report that day. It cannot tell whether you pay in full every month or have carried that balance for a year.
- VantageScore 4.0 looks back about two years (“trended data”). It can see whether balances are paid in full, steadily coming down, or steadily climbing.
Example: A small-business owner puts $8,000 of expenses a month on a card with a $10,000 limit and pays it off in full every month. Her statement reports an $8,000 balance, so Classic FICO sees 80% utilization and scores her like someone who is maxed out. VantageScore 4.0 can see two years of full payoffs and treats her as the low-risk borrower she is.
The same goes for someone who has been paying down debt. A borrower who cut card balances from $15,000 to $4,000 over 18 months gets credit for that trend under VantageScore 4.0. Classic FICO only sees today’s $4,000.
The trend cuts both ways. A borrower whose balances have been rising month after month can score lower on VantageScore 4.0 than on Classic FICO.
Top three borrowers who may miss on Classic FICO but qualify on VantageScore 4.0
Borrower | What Classic FICO sees | What VantageScore 4.0 sees |
1. The new-to-credit buyer | No score at all (needs 6+ months of history) | A score after as little as one month |
2. The borrower with medical collections | A collection, scored like any unpaid debt | Nothing; medical collections are excluded |
3. The borrower who paid off old collections | Collections that still count, even at a $0 balance | Nothing; paid collections are ignored |
1. The new-to-credit buyer
Classic FICO will not produce a score until an account has been open at least six months. Without a score, many lenders will not take the file at all. VantageScore 4.0 can score someone with one month of history, and it counts rent payments that appear on the credit report.
Example: A 25-year-old nurse has steady income and a solid down payment. She opened her first credit card four months ago and has rent reported to the bureaus through her landlord. Classic FICO returns no score. VantageScore 4.0 gives her one.
2. The borrower with medical collections
Example: A couple’s credit is clean except for a $3,100 hospital bill that went to collections after a billing dispute with their insurer. Classic FICO counts it like any other collection and can push them under their lender’s 620 cutoff. VantageScore 4.0 ignores it, so their score reflects years of on-time payments.
3. The borrower who paid off old collections
Under Classic FICO, paying a collection does not remove the damage. The account stays on the report, and in the score, for up to seven years. VantageScore 4.0 ignores collections once they are paid.
Example: A borrower lost his job in 2022 and three accounts went to collections. He went back to work, paid all three to a $0 balance, and has paid everything on time since. Classic FICO still scores him on those three collections. VantageScore 4.0 scores him on the borrower he is today.
Also watch: the “pay-in-full” card user from the utilization example above. High reported balances can sink a Classic FICO score even when every bill is paid in full, and VantageScore 4.0 can see the difference.
What to do now
Loan officers:
- Pull both scores on borderline files. Lenders choose one model per loan, for every borrower on it. Run both and use the one that scores your borrower fairly.
- Revisit recent declines. Files turned down in the last year for a low or missing FICO, especially ones with medical or paid collections, deserve a second look.
- Know your overlays. Check your own company’s and your mortgage insurer’s minimum-score rules for VantageScore loans. Manually underwritten loans still require Classic FICO.
Consumers:
- Ask your lender which score it uses, and whether it can check VantageScore 4.0.
- Pay balances down steadily before you apply. VantageScore 4.0 rewards a downward trend, not a last-minute payoff.
- Make sure your reports are accurate. A medical bill reported as a regular collection, a paid account still showing a balance, or an account that isn’t yours will hurt you under any model.
The model can change your score. Only accurate data makes it right. Under the Fair Credit Reporting Act (FCRA), credit bureaus and the companies reporting to them must correct inaccurate information. Credit Law Center helps consumers enforce those rights, and loan officers can refer clients whose reports are holding them back.
Sources
- Fannie Mae and Freddie Mac Open VantageScore 4.0 to All Lenders (Informative Research, Sept. 2026)
- FHFA moves to one pricing grid (HousingWire, Sept. 2026)
- Fannie Mae scraps minimum credit score for DU loans (Mortgage Professional America, Nov. 2025)
- A Credit-Score Shift at Fannie and Freddie Is Shaking Up the Mortgage Market (The Wall Street Journal via Yahoo Finance, Oct. 12, 2026)
