Lost Market Share, Reduced Originations, and Missed Long-Term Customer Relations

By Marcia Griffin, Founder & CEO, HomeFree-USA

For decades, we have talked about homeownership as a cornerstone of economic mobility. Yet for too many Americans – especially younger generations and many irst-time buyers — homeownership remains out of reach.

Millennials and Gen Z represent the largest emerging homebuyer segment in history, yet millions appear to be overlooked by legacy credit models. These borrowers are income producing, use credit differently than prior generations, and want to buy a home. Many, however, remain credit invisible or underrepresented in traditional scoring models.

Despite efforts by FHFA, many lenders remain tethered to outdated credit scores. This delay limits access to homeownership at a time when every lender wants increased production, greater market share, and long-term customer relationships.

At HomeFree-USA, and with our partners, we are working with families across the country. Many are doing the right things. They are working consistently, paying their bills on time, and making thoughtful financial decisions. Yet they still struggle to qualify. The issue is not always their financial performance. Often, it is how that performance is measured.

This is especially noticeable in our Center for Financial Advancement® where HomeFree-USA trains college graduates for powerful financial futures with homeownership as a top priority.

A More Complete View of Financial Behavior is Needed

Newer credit scoring approaches, like that of VantageScore 4.0, have been proven by credit third parties like Prosperity Now to provide a broader and more accurate picture of how younger generations manage their financial lives. VantageScore 4.0 usage of trended data reflects patterns and behaviors that traditional models may overlook, particularly for consumers who are early in their credit journey.

As a result, millions of individuals who were previously unscorable or overlooked can now be evaluated more fairly. The use of thin-file scoring is important. Many of these individuals are not high-risk borrowers. They are younger and need encouragement while steadily building toward financial stability.

They are, in many cases, future homeowners who are simply overlooked.

Meet the Next Generations Where They Are

Millennials and Gen Z engage with credit differently than previous generations. They rely less on traditional credit cards and more on consistent payments such as rent, cell phone bills, utilities, and other recurring obligations. Many have income streams that are stable but not always conventional, like those in the gig economy.

These realities do not signal higher risk. They reflect a changing economy and a shift in credit mentality. Credit evaluation systems must evolve to recognize these patterns and provide a clearer view of financial responsibility. When consumers are visible within the system, they have the opportunity to build, strengthen, and expand their credit profiles over time.

Put simply, when people are credit visible, we can better serve them.

From Invisible to Mortgage Ready

At HomeFree-USA, we guide homebuyers to become mortgage ready. That preparation includes financial education, counseling, and savings strategies. It also depends on access to newer systems that recognize readiness in a novel way.

When consumers are invisible or misrepresented by outdated measures, they are effectively locked out before they even begin the process.

A more modern approach to credit evaluation helps shift that dynamic. It allows lenders to better distinguish between true credit risk and a limited credit history. That distinction is essential if we are serious about expanding sustainable homeownership without lowering standards.

An Opportunity for the Industry

Recent announcements by both FHFA and HUD fully implemented modernized credit scoring models, introducing much needed competition on credit score model developers. According to reports, lenders are already actively using VantageScore 4.0 and/or in the late stages of integration. This is welcomed change but urgency is needed.

By incorporating additional credit data like rent payments, cell phone bills, etc. VantageScore 4.0 captures the everyday financial discipline that defines Millennials and Gen Z. I believe this results in a more complete and equitable assessment of credit worthiness with an opportunity to increase mortgage production.

Lenders, GSEs, and policymakers have the ability to:

• Expand access while maintaining sound risk practices
• Better serve younger and first-time homebuyers
• Close longstanding gaps in who gets seen and who gets approved

This is not about changing standards. It is about improving how we assess readiness.

It’s not a policy shift, it’s a market expansion strategy.

A thoughtful adoption of competitive credit scoring models is recomended. VantageScore 4.0 provides a more complete view of today’s consumers. Used appropriately, these tools can help ensure that responsible financial behavior is more accurately recognized.

We cannot fully address the housing affordability challenge without also addressing the access challenge. Modern credit scoring is not a silver bullet. But it is an important step toward aligning our systems with how younger people actually live and manage their finances today.

At HomeFree-USA, our work has always focused on preparing individuals and families for successful, sustainable homeownership, with strong partnerships that support long-term outcomes.

If we believe in expanding opportunity, then our systems must evolve to recognize it.

Because… the next generation is not unqualified. They are simply waiting to be seen, heard, and recognized.