This article was first published on GuruFocus.
Rocket Companies (NYSE:RKT) rose 2.58% at the open after its Rocket Mortgage division, the largest U.S. mortgage lender, said it would become the first lender to use VantageScore 4.0 as its preferred credit scoring model for all eligible loans. Beginning in the fourth quarter, VantageScore will be used as the default for Fannie Mae and Freddie Mac mortgages, VA home loans and other eligible products.
Rocket said about four months of testing showed VantageScore helped more customers qualify while reducing credit scoring costs. This year, the company generated 1.4 million credit reports using both VantageScore and FICO, and borrowers who saved money under VantageScore saved an average of $1,600 at closing. The model can take into account rent and utility payments where they appear on credit reports, allowing it to evaluate certain consumers with limited credit histories. CEO Jay Bray thanked FHFA Director Pulte for encouraging the use of multiple scoring models.
Investment real estate, second home, home equity, FHA, and jumbo loans will remain on FICO for now, and Rocket’s brokerage channel, Rocket Pro, will offer both scores.
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