Mortgagee Letter 2026-11: Updated Minimum Decision Credit Score Methodology for the Implementation of Alternative Credit Scores

Date: October 8, 2026

To: All FHA-Approved Mortgagees All Direct Endorsement Underwriters All Eligible Submission Sources for Condominium Project Approvals All FHA Roster Appraisers All FHA-Approved 203(k) Consultants All FHA-Approved Title I Lenders All HUD-Certified Housing Counselors All HUD-Approved Nonprofit Organizations All Governmental Entity Participants All Real Estate Brokers All Closing Agents

Subject: Updated Minimum Decision Credit Score Methodology for the Implementation of Alternative Credit Scores

Purpose: This Mortgagee Letter (ML) updates FHA’s Minimum Decision Credit Score (MDCS) methodology to facilitate the adoption of alternative credit score models.

Effective Date: The provisions of this ML are effective for case numbers assigned on or after January 1, 2027.

All updates will be incorporated into a forthcoming update of the HUD Handbook 4000.1, FHA Single Family Housing Policy Handbook (Handbook 4000.1).

Affected Programs: The provisions of this ML apply to all FHA-insured Title II Single Family mortgage programs.

Background: The Administration has prioritized reducing housing costs, expanding access to mortgage credit, and promoting competition and innovation in the mortgage market. Consistent with these priorities, FHA is adopting alternative credit score models, FICO 10T and VantageScore 4.0, alongside Classic FICO, to modernize its credit scoring framework. The new models leverage trended data which analyzes a consumers’ credit behavior over time. They also leverage non-traditional credit like rent and utilities which, along with the trended data, provide greater predictive power allowing FHA to better quantify risk and increase access to homeownership.

FHA will continue to require a tri-merge credit report, and the existing minimum credit score thresholds remain unchanged regardless of Credit Score Model Type.

The Home Equity Conversion Mortgage (HECM) program does not rely on credit scores as an underwriting component. Accordingly, the reference to the MDCS is being deleted from the general eligibility requirements for the program.

Summary of Changes: This ML:

• updates Minimum Decision Credit Score (II.A.1.b.ii(A)(3)) to revise the methodology for determining the MDCS when multiple credit score models are present;
• updates LTV Limitations Based on Minimum Decision Credit Score (II.A.2.b.i) to align headings and terminology;
• updates Approvable Ratio Requirements (Manual) (II.A.5.d.viii) to align terminology;
• updates Loan-to-Value Ratios for Refinance (II.A.8.a.x(A)) to align headings and terminology;
• updates Borrower Eligibility – Credit Score (II.A.8.b.ii(A)(3)) to align terminology;
• updates Streamline Refinance Exemptions (II.A.8.d.vi(C)(1)) to align terminology;
• updates Section 203(b) (II.A.8.o.vi(A)) to align terminology; and
• removes Borrower Minimum Decision Credit Score (II.B.2.b.ii(A)(8)), as HECMs do not rely on credit scores, and renumbers subsequent sections.

The Handbook 4000.1 sections impacted by this ML are provided in Attachment 1, with changes tracked in redline to help users clearly identify the policy requirements being revised or removed from the Handbook.

FHA Single Family Housing Policy Handbook 4000.1

The policy changes will be incorporated into Handbook 4000.1 as follows:

Minimum Decision Credit Score (II.A.1.b.ii(A)(3))

(a) Definitions

A Credit Score Model Type refers to a credit scoring model (e.g. Classic FICO, VantageScore 4.0, or FICO 10T) on a credit report that contains scores from the credit repositories for a Borrower.

A Borrower-Level Score refers to the credit score selected for each Borrower after evaluating the scores from each Credit Score Model Type submitted.

Minimum Decision Credit Score (MDCS) refers to the lowest Borrower-Level Score among all Borrowers on the transaction.

(b) Standard

(i) Determining the Minimum Decision Credit Score (MDCS)

To determine the MDCS, the Mortgagee must first determine the Borrower-Level Score for each Borrower by evaluating the scores from each Credit Score Model Type submitted.

Select the score from each Credit Score Model Type as follows:

• if three differing scores are reported, use the middle score;
• if two differing scores are reported, use the lowest score;
• if only one score is reported, use that score

The Borrower-Level Score is the lowest score of the selected scores from each Credit Score Model Type submitted. If only one Credit Score Model Type is submitted, the score selected from the process above is the Borrower-Level Score.

The MDCS is the lowest Borrower-Level Score among all Borrowers for the transaction.

Where the transaction involves multiple Borrowers and one or more of the Borrowers do not have any credit scores (non-traditional or insufficient credit), the MDCS is the lowest Borrower-Level Score among the Borrowers with credit score(s).

(ii) Eligibility

The Mortgagee may submit one or more Credit Score Model Type(s), provided the same model type(s) are used for all Borrowers. For example, the Mortgagee may not submit FICO 10T for the primary Borrower and VantageScore 4.0 for the co-Borrower.

The credit report retained in the case binder must include all Credit Score Model Type(s) submitted in the final TOTAL submission. The credit report may include additional Credit Score Model Types that were not submitted to TOTAL. For example, if VantageScore 4.0 and FICO 10T are submitted in the final TOTAL submission, the credit report retained in the case binder must include both VantageScore 4.0 and FICO 10T, but may also include Classic FICO.

The transaction is not eligible for FHA-insured financing if the MDCS is less than 500.

Loan-to-Value Limits (II.A.2.b)

i. LTV Limitations Based on Minimum Decision Credit Score (Applies to All Transactions)

The Mortgagee must review the credit report(s) for all Borrowers on a transaction to determine the Minimum Decision Credit Score (MDCS), except for Mortgages to be insured under Section 247 (II.A.8.h), Section 248 (II.A.8.g), Streamline Refinances (II.A.8.d), and Assumptions (II.A.8.n).

The MDCS will be used to determine the maximum insured financing available to a Borrower with traditional credit.

The table below describes the relationship between the MDCS and the LTV ratio for which the transaction is eligible. Borrowers with non-traditional or insufficient credit histories are eligible for maximum financing but must be underwritten using the procedures in Manual Underwriting of the Borrower (II.A.5).

Final Underwriting Decision (Manual) (II.A.5.d)

viii. Approvable Ratio Requirements (Manual)

The maximum Total Mortgage Payment to Effective Income Ratio (PTI) and Total Fixed Payments to Effective Income Ratio, or DTI, applicable to manually underwritten Mortgages are summarized in the matrix below.

The qualifying ratios for Borrowers with no Borrower-Level Credit Scores are computed using income only from Borrowers occupying the Property and obligated on the Mortgage. Non-occupant co-Borrower income may not be included.

Maximum Mortgage Amount for Refinance (II.A.8.a.x)

(A) Loan-to-Value Ratios for Refinance

The table below describes the relationship between the Minimum Decision Credit Score and the LTV ratio for transaction eligibility.

Borrower Eligibility II.A.8.b.ii(A)

(1) Application Deadline

The FHA case number must be assigned within one year of the date the PDMDA is declared, unless an additional period of eligibility is provided.

(2) Principal Residence

The mortgaged Property must be the Borrower’s Principal Residence.

(3) Credit Score

The transaction must have an MDCS of 500.

Streamline Refinance Exemptions (II.A.8.d.vi(C)(1))

(a) Non-credit Qualifying Exemptions

Unless otherwise stated in this section, the following sections of Origination through Post-closing/Endorsement (II.A) do not apply to non-credit qualifying Streamline Refinances:

• Ordering Appraisal
• Transferring Existing Appraisal
• Ordering Second Appraisal
• Ordering an Update to an Appraisal
• Minimum Decision Credit Score
• Borrower and Co-Borrower Ownership and Obligation Requirements
• Co-signer Requirements
• Principal Residence in the United States
• Military Personnel Eligibility
• Borrower Ineligibility Due to Delinquent Federal Non-Tax Debt
• Delinquent Federal Tax Debt
• Property Eligibility and Acceptability Criteria
• National Housing Act’s Statutory Limits
• Nationwide Mortgage Limits
• LTV Limitations Based on MDCS
• Underwriting the Property
• Underwriting the Borrower Using the TOTAL Mortgage Scorecard
• Credit Requirements (Manual)
• Income Requirements (Manual)
• Asset Requirements (Manual)
• Underwriting of Credit and Debt (Manual)
• Underwriting of Income (Manual)
• Underwriting of Assets (Manual)
• Calculating Qualifying Ratios (Manual)
• Approvable Ratio Requirements (Manual)
• Documenting Acceptable Compensating Factors (Manual)

(b) Credit Qualifying Exemptions

The following sections of Origination through Post-closing/Endorsement (II.A) do not apply to credit qualifying Streamline Refinances:

• Ordering Appraisal
• Transferring Existing Appraisal
• Ordering Second Appraisal
• Ordering an Update to an Appraisal
• Borrower Ineligibility Due to Delinquent Federal Non-Tax Debt
• Delinquent Federal Tax Debt
• Property Eligibility and Acceptability Criteria
• National Housing Act’s Statutory Limits
• Nationwide Mortgage Limits
• LTV Limitations Based on MDCS
• Underwriting the Property
• Underwriting the Borrower Using the TOTAL Mortgage Scorecard

Maximum Mortgage Amounts (II.A.8.o.vi)

(A) Section 203(b)

Mortgagees must calculate the maximum mortgage amounts in accordance with the requirements of Calculating Maximum Mortgage Amounts for Purchases, using the applicable Loan-To-Value ratio (LTV) from this section, subject to LTV Limitations Based on Minimum Decision Credit Score.

Paperwork Reduction Act

The information collection requirements contained in this document have been approved by the Office of Management and Budget (OMB) under the Paperwork Reduction Act (PRA) of 1995 (44 U.S.C. 3501-3520) and assigned OMB control numbers 2502-0005; 2502-0059; 2502-0117; 2502-0189; 2502-0302; 2502-0306; 2502-0322; 2502-0328; 2502-0358; 2502-0404; 2502-0414; 2502-0429; 2502-0494; 2502-0496; 2502-0524; 2502-0525; 2502-0527; 2502-0538; 2502-0540; 2502-0561; 2502-0566; 2502-0570; 2502-0583; 2502-0584; 2502-0589; 2502-0600; 2502-0610; and 2502-0611. In accordance with the PRA, HUD may not conduct or sponsor, and a person is not required to respond to, a collection of information unless the collection displays a currently valid OMB control number.

Feedback or Questions

HUD welcomes feedback from interested parties and will consider feedback in determining the need for future updates. Any feedback or questions regarding this ML may be directed to the FHA Resource Center at 1-800-CALLFHA (1-800-225-5342), answers@hud.gov, or www.hud.gov/answers. The FHA Resource Center is prepared to accept calls from persons who are deaf or hard of hearing, as well as individuals with speech or communication disabilities. Information on how to make an accessible phone call is available at https://www.fcc.gov/consumers/guides/telecommunications-relay-service-trs.

Attachment 1

Handbook 4000.1 Pages Impacted by this Mortgagee Letter

The Handbook 4000.1 sections impacted by this Mortgagee Letter (ML) are provided in this attachment, with changes tracked in redline to help users clearly identify the policy requirements being revised or removed from the Handbook.