California E&S Insurance

FICO 10T Is Coming to Conforming Mortgages: What It Means for Borrowers FICO just announced a major milestone in the transition to new credit scoring for conventional mortgages. They've reached agreement with FHFA and the GSEs (Fannie Mae and Freddie Mac) on the terms for releasing historical FICO 10T data. This is the last significant hurdle before lenders can start using the new scoring model for conforming loans. This isn't California-specific news, but it affects anyone getting a conventional mortgage—so I want to break down what this actually means for borrowers, who stands to benefit, and who might see their scores drop when the new model takes effect. # What's Changing For over 20 years, mortgage lenders have used what the industry calls "Classic FICO" scores, specifically these three versions: |Bureau|Current Model|Year Introduced| |:-|:-|:-| |Equifax|FICO Score 5 (Beacon 5.0)|Early 2000s| |TransUnion|FICO Score 4 (Classic 04)|Early 2000s| |Experian|FICO Score 2 (Fair Isaac V2)|Late 1990s| These models are ancient by technology standards. They take a snapshot of your credit at a single point in time and generate a score based on that moment. FICO 10T is fundamentally different. The "T" stands for "trended data"—instead of a snapshot, it analyzes 24+ months of your credit behavior to identify patterns over time. It can see whether you're paying down debt, maintaining stable balances, or gradually sinking deeper into the hole. # The Timeline Here's where things actually stand—and I emphasize "actually" because there's been a lot of confusion created by announcements that don't match operational reality: * **VantageScore 4.0** — FHFA Director Pulte announced in July 2025 that the GSEs would accept VantageScore 4.0 "effective immediately." But as of now, lenders still aren't using it for conforming loans because Fannie and Freddie haven't published the loan-level price adjustments (LLPAs) tied to VantageScore 4.0. Without pricing grids, lenders can't actually deliver loans using the new model. Those LLPAs aren't expected until late 2026 at the earliest. In practice, I know of no mortgage lenders actually using VantageScore to base credit risk decisions on for conforming loans, it's all still Classic FICO. * **FICO 10T** — Expected to roll out sometime in 2026, now that the historical data agreement is in place. Lenders need this data to analyze and prepare their systems before they can use the new model. **The "lender choice" approach:** The current plan allows lenders to choose between Classic FICO or VantageScore 4.0 (or eventually FICO 10T) on a loan-by-loan basis, one score per loan, not multiple scores. The original 2022 plan under former Director Thompson called for lenders to deliver both FICO 10T and VantageScore 4.0 on every loan, but that appears to have been set aside under the current approach. **Don't expect a fast switch.** I've been originating loans since 2002 and remember when the current Classic FICO models (Beacon 5.0, Classic 04) were adopted. There was a transition period where lenders accepted either the old or new scores for a while. The secondary market, investors who buy mortgage-backed securities, warehouse lenders, aggregators, moves slowly. Even when Fannie and Freddie formally accept a new scoring model, it takes time for the entire ecosystem to adopt it. The GSEs accepting something is one piece; the broader secondary market is another. # How FICO 10T Differs From Classic FICO The Classic FICO models mortgage lenders use today only see what your credit looks like right now. FICO 10T looks at the trajectory. **What FICO 10T evaluates that Classic FICO doesn't:** * **Balance trends over 24 months** — Are your balances going up, down, or staying flat? * **Payment patterns** — Do you pay in full each month, or do you carry balances? * **Debt trajectory** — Are you accumulating debt or paying it down? * **Rental payment history** — If reported, positive rent payments can now help your score * **Recovery patterns** — Shows whether someone recovering from past credit issues has genuinely changed behavior The model distinguishes between "transactors" (people who pay their credit card balances in full each month) and "revolvers" (people who carry balances month to month). Transactors are considered lower risk, and FICO 10T rewards that behavior in a way the old models couldn't. # Who Benefits From FICO 10T If you manage credit responsibly over time, not just right before applying for a mortgage, FICO 10T should work in your favor. **You'll likely see a higher score if you:** * **Pay credit card balances in full each month** — Transactors are explicitly rewarded under trended data analysis. Classic FICO couldn't distinguish between someone who pays in full and someone who makes minimum payments if both had the same balance on the day the report was pulled. * **Have been paying down debt consistently** — If your balances have been trending downward over the past 24 months, FICO 10T sees that positive trajectory. Someone actively reducing debt is less risky than someone with stable high balances. * **Are recovering from past credit problems** — If you had issues a few years ago but have demonstrated consistent improvement since, FICO 10T gives you credit for that pattern of recovery. Classic FICO just sees the derogatories. * **Have a thin credit file but good recent behavior** — First-time buyers and younger borrowers with limited history but responsible recent patterns may score higher. * **Pay rent on time** — If your landlord reports to the bureaus (or you use a rent-reporting service), FICO 10T can factor in positive rental payment history. This is a significant change for renters trying to build credit. * **Maintain low utilization consistently** — Not just on the day your statement cuts, but month after month over time. FICO claims the new model could help expand access to credit for first-time homebuyers, young adults, and renters—groups that have historically been underserved by snapshot-based scoring. # Who Gets Hurt By FICO 10T The flip side of rewarding good behavior over time is penalizing bad behavior over time. If you've been managing credit poorly, even if your current snapshot looks okay, FICO 10T will catch it. **You'll likely see a lower score if you:** * **Carry credit card balances month to month** — Revolvers get penalized under trended data. If you've been making minimum payments and carrying balances for years, FICO 10T sees that pattern as higher risk than Classic FICO did. * **Have increasing balances** — If your debt has been trending upward over the past 24 months, that's a red flag under FICO 10T. Someone whose balances are growing is statistically more likely to default. * **Consolidated debt with a personal loan, then ran the cards back up** — This is a big one. Classic FICO rewarded debt consolidation because it reduced your revolving utilization. FICO 10T specifically tracks whether you rack up new credit card debt after taking out a personal loan to pay off old credit card debt. If you did, expect a hit. * **"Game" the system with one-time paydowns** — Under Classic FICO, you could pay down your cards right before a mortgage application and see an immediate score boost. FICO 10T looks at 24 months of data, so a last-minute paydown doesn't erase two years of high balances. * **Have recent late payments** — Even a single 30-day late payment can significantly impact your FICO 10T score for up to two years because the model weighs recent negative events more heavily. According to various analyses, people with strong credit profiles may see scores increase by 10-20+ points, while those with riskier patterns could see similar decreases. The gap between responsible and risky borrowers will widen. # What This Means for Mortgage Borrowers **If you're applying for a mortgage in 2025:** You're being scored on Classic FICO. Period. Despite the headlines about VantageScore 4.0 being "approved," lenders aren't actually using it yet for conforming loans. The old rules still apply, utilization on the day the report pulls matters, recent paydowns help, etc. **If you're planning to buy in 2026 or later:** FICO 10T may or may not be in use by then, timelines keep shifting. But regardless of when it officially takes effect, start thinking about credit management as a long-term game, not a sprint before your application. The behaviors that help you under FICO 10T are the same things that constitute genuinely responsible credit management: 1. **Pay credit cards in full when possible** — If you can't pay in full, pay more than the minimum and work the balance down over time. 2. **Avoid balance creep** — Don't let your balances slowly increase month after month. 3. **If you consolidate debt, don't reuse the cards** — Taking a personal loan to pay off credit cards only helps if you don't run the cards back up. 4. **Consider rent reporting** — If you're a renter with a thin credit file, services that report your rent payments to the bureaus may help your FICO 10T score. 5. **Don't rely on last-minute paydowns** — Under FICO 10T, consistency over 24 months matters more than what your balances look like the week before you apply. # The Bottom Line FICO 10T represents the biggest change to mortgage credit scoring in decades. It rewards borrowers who manage credit responsibly over time and penalizes those who don't, regardless of what their credit looks like on any single day. For people who pay their bills, keep balances low, and don't play games with credit, this is good news. For people who've been getting by with last-minute score optimization or carrying high revolving balances, the new model will be less forgiving. The transition is coming, currently estimated to be in 2026, though timelines in this industry have a habit of slipping. If you're planning to buy a home in the next couple of years, start thinking about your credit trajectory now, not just your current snapshot. *I'm a California mortgage loan officer (NMLS #81195). This is educational content about how the new scoring models work, not personalized financial advice.*

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