For millions of invisible Americans, the door to homeownership just opened. These citizens have paid rent on time for years but lacked a traditional credit score. One expert is warning them to be careful as they navigate this new financial landscape.
The Department of Housing and Urban Development and the Federal Housing Finance Agency made a landmark announcement recently. The agencies will now accept VantageScore 4.0 and FICO Score 10T. The mortgage industry is bracing for a surge of new applicants following the shift.
Micah Smith operates as a leading credit repair influencer. She says the inclusion of rent and utilities is a landmark shift but warns borrowers must be wary.
"People who were invisible in the system — no cards, no loans, no score — can now potentially show up with a real number," Smith told Fox News Digital. She cautioned that the new models are more rigorous than many realize. "People say getting a home is the American Dream. I call it the American drain when you don't do it properly," she added.
The acceptance of VantageScore 4.0 represents the first major change to mortgage credit requirements in over three decades. This stems from the Credit Score Competition Act signed by President Donald Trump during his first administration. Smith noted that many of her clients are reacting to the news in different ways.
"The narrative the media has been spinning has people all over the place," Smith said. "That is simply people not understanding what is coming down the pipeline and why."
"Everything being put into place right now is to help more people get into homes and to update a system that has not been updated in over 30 years," Smith added. "FICO has been in place since 1989."
"The Credit Score Competition Act… set something significant in motion. Look at how long it’s taken. It’s now 2026 and it’s finally being implemented," Smith stated.
"This was never about destroying FICO. This is about making sure FICO does not monopolize the credit scoring market," Smith explained. "This is about updating an antiquated system."
Federal Housing Finance Agency Director Bill Pulte highlighted a key benefit of the new system. The update allows lenders to account for regular rent payments. This aims to help creditworthy Americans who lack traditional credit card debt but maintain a perfect history of paying their bills.
"Rent and utilities now count — when reported," Smith said. "If your clients' landlord reports to the bureaus, those years of on-time payments now feed the score… But here's the flip side nobody’s talking about: If your rent is being reported, a late payment potentially can hurt you, too."
"Reporting cuts both ways," Smith continued. "Don't let clients assume this is all upside."
Smith also warned about existing financial burdens dragging down a score. Large student loan repayments, auto loans, or personal loans can still negatively impact mortgage eligibility despite the new models.
"That balance piece is real… High balance equals high score pressure under this model," Smith stated. "That’s the nuance people need to hear."
Borrowers cannot choose which scoring models a lender uses during the application process. Smith predicts banks will likely lean toward pulling VantageScore 4.0 because of cost. FICO traditionally charges $9.99 per credit report pull, while VantageScore costs just 99 cents.
"To me, this is starting to look like a race to the bottom," Smith said, "where VantageScore potentially ends up monopolizing the very market it claimed to open up."
"Lending as a whole is a multitrillion-dollar industry, and people are in more debt than they have ever been," Smith noted. "My concern is this: giving more people access to mortgages who didn’t previously understand credit means they’re probably still coming in at a pretty subpar credit score."
However, this massive shift does not raise any recession-level concerns for the financial expert. "I do not see a repeat of 2008, 2009," Smith said. "Banks now have skin in the game."
"Back then, there was no real repercussion for lenders selling bad loans off to the secondary market," Smith explained. "That guardrail now exists. We are not going to see a crash in that sense."
"But here's what I do worry about: more people going into debt unnecessarily because they still don't understand the credit system," she continued. "Remember, those who understand interest earn it; those that don’t pay it."
"Credit is not your identity — but it is your financial reputation," Smith concluded. "And right now, more eyes are on it than ever before. Use this moment to get it right."