Loans insured by the Federal Housing Administration will be scored on a wider menu of credit models next year. For case numbers assigned on or after January 1, 2027, FHA will accept VantageScore 4.0 and FICO Score 10T alongside the Classic FICO score it has long relied on. HUD has also rewritten how a lender turns several scores into the one number that decides the loan.
What does the January 1 date switch on?
HUD set out the change in Mortgagee Letter 2026-11, a formal notice to FHA lenders dated October 8. It applies to every FHA-insured Title II single-family mortgage program, the ordinary home-purchase and refinance loans. The letter is signed by Joseph M. Gormley, who is performing the duties of the assistant secretary for housing and FHA commissioner.
The date is tied to the case number, the identifier FHA assigns to a loan file, and not to the application date or the closing date. A loan whose case number is assigned on December 31 follows the old rules. One assigned the next day follows the new ones. Someone who applies in the fall and closes in the spring could land on either side.
For a borrower, the choice of model belongs to the lender. HUD says a lender may submit one or more models, but must use the same model type or types for every borrower on a loan. A couple applying together cannot have one spouse scored on one model and the other spouse on a different one.
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FHA announced the January 1 start on September 11, according to a bulletin archive kept by the mortgage compliance firm TENA Companies, and the October letter turns that date into written policy. HUD says the changes will be folded into a coming update of its FHA Single Family Housing Policy Handbook. Until then, lenders are told to keep following the current credit report guidance.
How does FHA pick the single score that decides a loan?
Each model produces up to three scores, one from each credit bureau. For every model, HUD says the lender takes the middle score if all three differ, the lower of the two if only two differ, and the only score if just one is reported. That is the same approach FHA has used with Classic FICO.
The new step comes when a lender submits more than one model. HUD writes that the borrower-level score is the lowest of the selected scores from each model type submitted. The score that governs the whole transaction, which HUD calls the minimum decision credit score, is then the lowest borrower-level score among everyone on the loan.
In practice, adding a second model can only hold a borrower’s number steady or pull it down. A file that looks like a 640 on VantageScore 4.0 and a 610 on FICO 10T would be treated as a 610. That is the arithmetic of the rule as HUD wrote it, and it explains why the agency’s own preparation guide says lenders may prefer to submit a single model.
The same preparation guide adds a second hurdle. When several models go through FHA’s automated underwriting system, called TOTAL Scorecard, all of them have to pass. If any one model draws a Refer recommendation, the final recommendation is Refer, which sends the file to a person for manual underwriting.
Do the 500, 580 and 620 cutoffs move for the new models?
They do not. The letter states that the existing minimum credit score thresholds remain unchanged regardless of model type, and the preparation guide says the established thresholds of 500, 580 and 620 apply to the new models too. A transaction with a decision score below 500 is not eligible for FHA-insured financing.
A score of 580 or higher allows maximum financing. A score from 500 to 579 limits the loan to 90 percent of the home’s value. Those lines were drawn around Classic FICO, and HUD has not said whether a typical borrower will score higher or lower on the newer models. The letter gives no estimate of how many borrowers will be affected.
The tri-merge requirement also stays. FHA still wants a credit report that merges files from all three bureaus, prepared by an independent credit reporting agency. The report kept in the case file has to include every model that was submitted to TOTAL, and it may include others such as Classic FICO.
What happens to borrowers with thin or missing credit files?
The letter keeps a separate path for them. Borrowers with non-traditional or insufficient credit remain eligible for maximum financing, but the loan must be manually underwritten. When some borrowers on a loan have scores and others do not, the decision score comes from the lowest score among those who have one.
Manual underwriting carries tighter limits. HUD caps qualifying ratios at 31 percent for housing costs and 43 percent for total debt on loans with a score below 580 or no score at all. For a manually underwritten loan with no score, only income from borrowers who will live in the home counts, so a non-occupant co-borrower’s income cannot be added.
Nothing in the letter says VantageScore 4.0 or FICO 10T will help people with thin files, and that claim should not be assumed. What the document does is let a lender submit a model that may see a borrower differently, inside rules that still penalize the lowest result.
Why do reverse mortgages drop out of the credit score rules?
Home Equity Conversion Mortgages, the FHA-insured reverse mortgages, get a deletion instead of an update. HUD removes the borrower minimum decision credit score from the handbook for those loans, stating that there is no such score for a HECM. TENA’s summary of the letter quotes the reasoning that HECMs do not rely on credit scores.
The deletion changes no standard that applied before, because reverse mortgages never used a decision score. Reverse mortgage borrowers will not see the new models appear anywhere in their loan file. The letter renumbers the later handbook sections to close the gap.
Questions about the changes go to the FHA Resource Center at 1-800-225-5342 or answers@hud.gov, according to the letter. HUD’s website is the official place to find the mortgagee letter and the handbook update when it is published. Lenders, not borrowers, carry the technical work before January 1.
What sits in the three credit files an FHA lender pulls?
A decision score is only as clean as the three bureau files behind it, and the lowest result governs the loan. One collection account that a borrower does not recognize can be the difference between the 580 line and the 500 line.
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This article was produced with AI assistance and edited for accuracy against the sources linked above.
