The credit scoring landscape is shifting faster than it has in decades—and the ripple effects are being felt far beyond mortgages.
At Pave, we're seeing a convergence of regulatory, economic, and technical forces that are reshaping how lenders think about risk. Traditional scoring models are no longer sufficient. The next generation of credit decisioning will be real-time, product-specific, and built on actual financial behavior—not just historical trade lines.
The Mortgage Market Is Cracking Wide Open
The most conservative corner of lending is being forced to modernize:
- FICO's monopoly is ending: By Q4 2025, lenders must use both FICO and VantageScore 4.0 for GSE loans¹. This is the first time regulators have approved a true alternative—and it paves the way for further innovation.
- Bi-merge replaces tri-merge: FHFA is eliminating the requirement to pull credit from all three bureaus², reducing redundancy but increasing blind spots.
- FICO pricing backlash: At $4.95 per score³, wholesale pricing is driving lenders to seek more cost-effective solutions that don't sacrifice accuracy.
Delinquencies Are Rising—and Legacy Models Are Missing the Signals
Mortgage delinquencies are on the rise⁴, and it's not just subprime borrowers. Even consumers with strong FICO scores are slipping behind. This tells us what we've long suspected: historical credit reports aren't enough.
Real-time bank transaction data—what's happening in a borrower's financial life right now—can reveal:
- Recent cash flow deterioration
- Missed rent or utility payments
- Declines in income or rising financial volatility
Rent Is Finally Being Counted—but Infrastructure Lags Behind
For the first time, rent payments—the largest monthly expense for most consumers—are eligible to be counted as tradelines. VantageScore 4.0 supports this⁵, but most lenders don't yet have the infrastructure to make sense of this data at scale.
That's the opportunity.
Why This Matters for Every Lender
This isn't just about mortgages. These tailwinds affect every part of the lending ecosystem:
- Short-term lenders need near-term risk signals that traditional scores ignore
- Auto lenders want to capture income volatility before repossessions spike
- Credit card issuers are hungry for early indicators of financial stress
- BNPL and installment lenders need to differentiate between "thin file" and "no cash flow"
The Real-Time Advantage
At Pave, we believe the next generation of credit scoring is:
- Real-time: Built on bank transactions, not stale trade lines
- Near-term: Focused on whether a borrower will repay next week, not just rank-ordering them for a generic credit product
- Tailored: Purpose-built for the nuances of each credit product—small dollar loans, charge cards, point-of-sale, and more
The Convergence Point
We're at a rare moment where:
✅ Regulation is opening the door
✅ Credit stress is exposing the flaws in legacy models
✅ Technology makes real-time underwriting possible
The question isn't if alternative scoring will go mainstream—it's who gets there first.
At Pave, we're building the infrastructure and scoring layer for this future. Our bank transaction-based scores are already powering better approvals, lower defaults, and smarter pricing for forward-thinking lenders.
