If you've ever gotten your loan estimate and thought "wait, why does pulling my credit cost that much?" you're not alone. This post answers that question and explains what's changing.

Last year the FHFA director announced Fannie Mae and Freddie Mac would officially begin accepting VantageScore 4.0 for mortgage underwriting.

This was mandated by the government to break up the monopoly that FICO had on the industry. Over the past three years, credit report fees have risen by 300%+. Me personally, I remember in 2023 the credit report fee was around $76 for a trimerge hard credit pull. It's currently sitting at $136.50.

Fannie and Freddie purchase the majority of mortgages. In order to conform with their rules, lenders had to use FICO models 2, 4, or 5, which was hardcoded into their automated underwriting system.

VantageScore 4.0 is not owned by FICO. It's owned by Experian, TransUnion, and Equifax, and it directly competes with FICO. This competition should help lower these credit report fees in the future as more and more lenders start adopting it.

How VantageScore is different

VantageScore 4.0 will be much closer to what you see on your free credit monitoring app. For example, Credit Karma uses VantageScore 3.0, and since it's part of the same family of models, you'll see the scores align a little more closely.

I've written before about why your credit score pulled by a loan officer is so much lower than what you see online. Now, with the use of VantageScore, you won't see that wide of a difference.

The biggest change, in my opinion, is that VantageScore 4.0 will give you a score with just 1 month of history.

The current FICO model requires at least 6 months of history before even giving you a score. And if you've had history but no active accounts, your score evaporates.

VantageScore gives you a score based on the history and will retain a score even without active accounts.

It's also cheaper. It's about half the cost of the current FICO model being used.

What it means for buyers

By early 2027, all lenders should have this fully implemented.

If your loan officer is telling you that your score is 40 points lower than what you're seeing on your own reporting, you could be getting charged a higher interest rate. See if they'll accept VantageScore 4.0 and how that might help your rate or costs.

What you see online vs VantageScore is still a different model, but I'm betting you'll see that gap close quite a bit.

If you want to see how credit costs and other fees stack up on your specific loan, run the numbers with our payment and closing cost calculator. And if you want to talk through your specific score situation before you shop for a rate, book a free planning session with me.

Hope this helps.

-Sam

Originally shared by u/SamTMortgageBroker in r/NewbHomebuyer — view the original thread.