On October 8, the FHA issued Mortgagee Letter 2026-11, which changes how mortgagees determine the minimum decision credit score so that alternative credit score models can be used. Under the letter, the FHA will accept FICO 10T and VantageScore 4.0 alongside Classic FICO. The newer models draw on trended data, which tracks a consumer’s credit behavior over time, and non-traditional credit such as rent and utility payments, which the FHA said gives it “greater predictive power” in assessing risk and broadens access to homeownership. The FHA will still require a tri-merge credit report, and its existing minimum credit score thresholds remain the same regardless of the model used. The changes take effect for case numbers assigned on or after January 1, 2027, and apply to all FHA-insured Title II single-family mortgage programs. Separately, in September, Fannie Mae and Freddie Mac expanded VantageScore 4.0 availability to all of their approved lenders (previously covered by InfoBytes here).

Under the revised methodology, mortgagees first determine a “Borrower-Level Score” for each borrower by selecting a score from each credit score model submitted (the middle of three differing scores, the lower of two, or the only score reported) and taking the lowest of those selected scores. The minimum decision credit score is then the lowest borrower-level score among all borrowers on the transaction. Mortgagees may submit one or more model types but must use the same model type or types for every borrower. Transactions with a minimum decision credit score below 500 remain ineligible for FHA-insured financing, those scoring 500 to 579 remain limited to a maximum 90 percent loan-to-value ratio, and those at or above 580 remain eligible for maximum financing. The letter also removes the minimum decision credit score from the eligibility requirements for Home Equity Conversion Mortgages because that program does not rely on credit scores.