The U.S. Credit Score System Is Changing — And It Could Help Millions of Immigrants

If you moved to the U.S. and felt like the credit system was stacked against you — you were not imagining it.

For decades, the American credit system has been built around one company: FICO. And for decades, that system has quietly penalized people who pay their bills on time but don't have the "right kind" of credit history.

That includes most immigrants.

But something significant happened in July 2025 — and most people still don't know about it.

FICO Has Controlled Credit Scoring for Decades

FICO controls roughly 90% of the credit scoring market in the United States. When you apply for a mortgage, a car loan, or a credit card, the lender almost always checks your FICO score.

Here is the part most people don't realize: banks pay FICO every time they pull a credit score. That cost gets passed down to consumers — through higher fees, higher interest rates, and more expensive borrowing overall.

The system rewards people who already have credit. If you grew up in the U.S. with a credit card at 18, a student loan at 22, and a car payment at 25, you have a long, rich credit file by the time you want to buy a home.

But if you moved to the U.S. at 30 with zero American credit history — even if you paid rent on time for years, even if you never missed a utility bill — FICO does not care. Your score is either very low or nonexistent.

That is what a "thin credit file" means. And for millions of immigrants, it is the invisible wall between them and financial progress. (If you're new to credit scores, start with our complete guide to credit scores for immigrants.)

What Changed in July 2025

In July 2025, the Federal Housing Finance Agency (FHFA) approved the use of VantageScore 4.0 for mortgages backed by Fannie Mae and Freddie Mac. These are the two government-backed entities that guarantee the majority of mortgages in the United States.

This is a major shift. For the first time, mortgage lenders can choose between two credit scoring models — Classic FICO and VantageScore 4.0 — when evaluating borrowers.

VantageScore 4.0 was developed jointly by the three major credit bureaus: Equifax, Experian, and TransUnion. It was designed to score more people, more fairly.

Why VantageScore 4.0 Matters for Immigrants

The biggest difference between FICO and VantageScore 4.0 is the data each model uses.

FICO relies primarily on traditional credit data: credit cards, loans, mortgages, and similar accounts reported to credit bureaus.

VantageScore 4.0 also considers what is called "alternative data." This includes:

According to VantageScore, their model can score approximately 33 million more people than traditional models. Many of those people are immigrants, young adults, and others with limited or no traditional credit history.

For someone who moved to the U.S. two years ago, pays rent on time, and has a cell phone plan — but no credit cards or loans — VantageScore 4.0 could produce a meaningfully higher score than FICO would.

FICO vs. VantageScore 4.0: A Simple Comparison

FICO:

VantageScore 4.0:

What This Does Not Change

It is important to be clear about what this shift does not do.

VantageScore 4.0 does not replace FICO. Lenders can still use FICO, and many will continue to do so. The FHFA decision gives lenders a choice — it does not force a switch.

Also, rent and utility payments only count if they are reported to a credit bureau. Not all landlords report rent payments. Not all utility companies report payment history. If your payments are not being reported, they will not appear in your credit file regardless of which scoring model is used.

You can check if your rent is reported by reviewing your credit report, or you can ask your landlord or use a third-party rent reporting service.

How to Build a Stronger Credit Score — No Matter Which Model

Whether a lender uses FICO or VantageScore, the core habits that build good credit are the same. Here is what actually matters:

Pay on time — every time

Payment history is the most important factor in both FICO and VantageScore. Even one missed payment can hurt your score. Set up autopay for at least the minimum payment on every account.

Keep credit card balances low

This is called credit utilization. Try to keep your balance below 30% of your credit limit. If your limit is $1,000, try not to carry more than $300 at any time. Lower is better — many experts suggest staying under 10% if possible. (For more on using credit cards wisely, see lessons from getting my first U.S. credit card.)

Do not close your oldest credit card

The age of your credit history matters. Closing your oldest account shortens your average credit age, which can lower your score. Even if you don't use the card, keep it open.

Check your credit report for errors

Mistakes happen. Old debts, incorrect balances, or accounts that don't belong to you can drag your score down. You can check your credit report for free at AnnualCreditReport.com. Dispute anything that looks wrong.

Consider becoming an authorized user

If you have a family member or close friend with excellent credit, ask if they would add you as an authorized user on one of their credit cards. You don't need to use the card — just being listed on the account can help build your credit history faster.

This works because the account's payment history and credit limit get added to your credit report.

Get your rent reported

If VantageScore 4.0 matters to you — and it should — make sure your rent payments are being reported to credit bureaus. Services like Rental Kharma, Boom, or LevelCredit can help report your rent if your landlord does not.

Why This Matters Beyond Mortgages

The FHFA decision was specifically about mortgages. But VantageScore 4.0 is already used by many other lenders — for credit cards, auto loans, and personal loans.

As VantageScore adoption grows, the entire credit ecosystem may gradually shift toward including alternative data. That means immigrants, newcomers, and anyone with a thin credit file may find it easier to access credit at fair rates — not just for homes, but for cars, education, and everyday financial needs.

This does not mean the system is suddenly fair. There is still a long way to go. But the direction is changing, and immigrants stand to benefit more than almost any other group.

What You Can Do Right Now

If you are an immigrant or newcomer to the U.S., here are the most important steps you can take today:

Building credit takes time. But for the first time in decades, the system is starting to recognize that paying rent and bills on time should count for something.

And for millions of immigrants, that recognition could make a real difference.

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