Could Your Rent Payments Help You Qualify for a Mortgage? For years, many potential homebuyers have assumed that the credit score they see through their bank or credit card company is the same score a mortgage lender will use.
That is not always true. Mortgage lenders have traditionally relied heavily on older versions of the FICO scoring model. Now, approved lenders have another option for certain eligible loans sold to Fannie Mae and Freddie Mac: VantageScore 4.0.
This does not mean every lender will use VantageScore or that every borrower will receive a higher score. However, it could give some buyers another way to have their credit history evaluated.
What Does VantageScore 4.0 Look At?
VantageScore 4.0 reviews many of the same credit habits that other scoring models consider, including:
Payment history
Credit utilization
Age and types of credit
Recently opened accounts
Credit inquiries
Current balances
Available credit
Payment history is the largest factor. Late payments, collections, defaults, bankruptcies and other negative activity can have a significant effect on your score.
Credit utilization is also important. This is the percentage of your available revolving credit that you are currently using.
For example, if you have a credit card with a $10,000 limit and a $3,000 balance, your utilization on that account is 30%.
Generally, lower utilization shows that you are not relying too heavily on your available credit.
It Looks at Credit Trends, Not Just Today’s Balance
One of the biggest differences with VantageScore 4.0 is its use of trended credit data. Instead of only looking at your current balance, the model may examine how your credit behavior has changed over time.
Consider two buyers who each owe $5,000 on their credit cards. One buyer has been steadily paying the balance down from $9,000. The other buyer’s balance has gradually increased from $1,000.
Their current balances are identical, but their credit habits are moving in opposite directions. Trended data can help identify that difference.
This is another reason why consistently paying down debt can matter, even if your credit report has not reached the finish line yet.
Can Rent, Utilities and Phone Payments Count?
VantageScore 4.0 may include rent, utility and telecommunications payment history when that information appears on your credit reports.
The important phrase is “when reported.”
Paying your rent on time does not automatically improve your credit score. Your landlord, property-management company or a rent-reporting service must report that information to one or more of the three major credit bureaus.
The same applies to many utility and phone payments.
Before signing up for a reporting service, ask:
Which credit bureaus receive the information?
Does it report positive and negative payment history?
Are there enrollment or monthly fees?
Can previous payments be reported?
How quickly will the account appear?
Reporting positive rental history could be useful for someone who has consistently paid rent but has a limited history with credit cards or traditional loans.
Will Your VantageScore Be Higher Than Your FICO Score?
Possibly, but not necessarily. VantageScore and FICO use different formulas. One person’s VantageScore could be higher than their mortgage FICO scores, while another person’s could be lower.
The new mortgage pricing tables also use different score thresholds for each model. This does not mean every borrower receives an automatic 20-point increase by using VantageScore.
Think of it as a different evaluation, not a guaranteed score boost.
What VantageScore Does Not Consider
Your VantageScore is based on information contained in your credit reports. It does not use personal characteristics such as:
Race
Religion
Gender
Marital status
Age
Salary
Occupation
Employer
Total assets
A mortgage lender will still evaluate your income, employment, debts, assets and other financial information separately when reviewing your loan application.
A credit score is important, but it is only one part of qualifying for a mortgage.
Will Every Mortgage Lender Offer It?
No.
The option to use VantageScore 4.0 does not mean every lender will immediately offer it. Lenders can continue using eligible Classic FICO scores for qualifying loans.
For eligible loans using VantageScore, the same scoring model must be used for every borrower on the application. A lender cannot use VantageScore for one borrower and Classic FICO for another borrower on the same loan.
Manually underwritten loans also continue to use Classic FICO.
What Should Homebuyers Do Next?
If credit has delayed your homebuying plans, consider asking a mortgage lender these questions:
Do you currently offer VantageScore 4.0 for eligible mortgage loans?
Would my loan type qualify to use it?
How do my VantageScore and mortgage FICO scores compare?
Could reported rental payments affect my credit profile?
What specific steps could improve my ability to qualify?
Do not open new accounts, close credit cards or pay off collections without first speaking with a knowledgeable lender or credit professional. A well-intended decision can sometimes affect your score differently than expected.
A “Not Yet” May Be Worth Revisiting
VantageScore 4.0 will not solve every credit challenge, and it does not guarantee approval, a lower interest rate or better loan pricing. What it does provide is another approved way for participating lenders to evaluate a buyer’s credit history.
That could be especially meaningful for renters with reported payment history, buyers with limited traditional credit or people whose credit habits have been steadily improving.
If you were previously told that you were not ready to purchase, your answer may still be “not yet.” But with lending guidelines and credit models changing, it may be worth having the conversation again.
If you are considering buying a home in Merced, Stanislaus or San Joaquin County, I would be happy to help you understand the process and connect you with a trusted lender who can review your available options.
This information is provided for general educational purposes and is not a guarantee of financing, loan approval, credit-score improvement or specific loan terms. Mortgage programs and lender requirements may vary.