FHA Is Changing How It Scores Your Credit: What It Means for First-Time Buyers

Something quietly important changes for first-time home buyers on January 1, 2027, and very few people have heard about it yet. Starting then, FHA will accept two newer credit scoring models, VantageScore 4.0 and FICO Score 10T, alongside the classic FICO scores lenders have relied on for decades. The change, spelled out in FHA Mortgagee Letter 2026-11 and issued October 8, matters because the newer models can see payment history the old ones could not: rent, utilities, and other recurring bills. For buyers who have paid rent on time for years but never built a traditional credit file, that is a real change in what the system sees.

The practical version of what changed

From January 1, 2027, any FHA-insured loan with a case number assigned on or after that date may be scored with VantageScore 4.0, FICO Score 10T, or classic FICO. The two newer models use trended data, meaning they look at how you have used credit over time rather than a single snapshot, and they can incorporate non-traditional credit such as rent and utility payments. FHA's stated purpose is better predictive power and broader access to credit.

The lowest-score rule, in plain English

There is one detail worth understanding before anyone over-celebrates. When a lender submits more than one type of credit score model, FHA requires the borrower-level score to be the lowest of the selected scores from each model type submitted for that borrower. And the minimum decision credit score for the loan is the lowest borrower-level score across everyone on the mortgage. In plain terms: no cherry-picking the flattering number. Lenders must use the lowest score in play, and if two of you are buying together, the lower of the two governs the underwriting. That is conservative, and it is the right way to run a program backed by the taxpayer.

What stays the same

The guardrails do not move. A minimum decision credit score below 500 remains ineligible for FHA financing. Between 500 and 579, the loan-to-value ratio is capped at 90 percent, which means a 10 percent down payment. At 580 and above, maximum financing is available, which for most purchase money loans means the familiar 3.5 percent down. A tri-merge credit report is still required, and every borrower on the loan must be scored with the same model or models. The thresholds are exactly what they were; only the scores that feed into them are expanding.

The real opportunity: renters and thin credit files

This is the part that should encourage a lot of Portland area renters. The newer scoring models can factor in on-time rent and utility payments, the very history that has never appeared on a traditional credit report. A renter who has paid on time for five straight years has demonstrated steady financial responsibility, and starting in January, FHA's credit system can finally see it. And if a borrower still has no credit score at all, the manual underwriting path remains available, using documented non-traditional credit references such as rent and bills in place of a score. No score is not a dead end in the FHA program; it has never been, and this change does not alter that.

Where this fits in today's market

Rates have eased a little from their early October peak. Freddie Mac's weekly survey, released October 22, put the average 30-year fixed rate at 7.32 percent, down from 7.40 percent the previous two weeks, with the 15-year at 6.68 percent. FHA 30-year rate indexes have been hovering right around 7.0 percent in late October, below the conventional headline, according to the rate index compiled by Optimal Blue and published through the Federal Reserve Bank of St. Louis. And the local market has been loosening on the inventory side: the RMLS market action report covering September sales shows a Portland metro median of $545,000, roughly flat year over year, with 4.2 months of supply, the most of 2026 so far.

On the limit side, FHA's 2026 loan limit for the Portland metro is $701,500 for a single-family home in Washington, Clackamas, and Multnomah counties, a ceiling that comfortably covers the regional median and most purchases in Oregon City, Canby, Wilsonville, and Tualatin. It does not cover most of West Linn, where the median sits near $815,000, or much of Lake Oswego, where typical prices run well above the ceiling and usually call for conventional or jumbo financing. FHA is a strong fit for a large share of the metro, even as it is not the answer everywhere, and knowing which program fits your price point is exactly the kind of conversation worth having with someone who works across all of them.

What I would do between now and January

• Ask what gets pulled. Ask every lender you interview which credit score models they use and how they apply the lowest-score rule. Because the scores now come from multiple model types, the exact numbers in your file matter more than they used to.
• Treat rent like the credit history it is. If your rent and utilities have been on time, keep them that way and be ready to document them. If you have been juggling late payments, use the next two months to steady them; the newer models weigh that history.
• Do not wait for January to apply. The new rules do not lower the qualifying bar; they change which scores count. If your file qualifies today at 580 and above, waiting does not help you, and in a market with growing supply you may give up negotiating leverage while you wait.
• Check your credit report now. Errors cost buyers real money. Pull your reports, dispute anything that is wrong, and resolve it before an underwriter sees it, not after.
• If you have no score, you are not out. FHA manual underwriting with documented rent and bill payments is still a real path. Do not let the absence of a traditional score stop you from starting the conversation.

If you are a first-time buyer wondering whether your credit history, your rental record, or your down payment is enough, this is exactly the season to get a straight answer. Bring me your questions and your real numbers, and I will walk you through FHA, VA, and conventional options side by side, no pressure and no jargon. The goal is simple: you should know exactly where you stand, what the January change means for you, and what to do between now and closing day.

Travis Olson

Area Manager – Senior Loan Officer / Construction Development Specialist

NMLS · 111072 · OR/WA · Eureka Mortgage Planning