The 2026 Lending Landscape: What Credit Unions Need to Know About Rising Credit Costs & FHFA Changes

As we head into 2026, the mortgage market is facing a familiar set of pressures: constrained loan volumes, cautious refinance activity, and tight profit margins. Meanwhile, loan origination costs continue to climb due to rising credit reporting expenses and evolving regulatory requirements.

For credit unions, these market conditions present unique challenges. Unlike large, nationwide lenders, credit unions typically operate with tighter budgets, leaner teams, and a strong member-first mandate. Thus, they may struggle more to absorb rising costs while delivering the quality of service their members expect.

Fortunately, forewarned is forearmed. When you understand the top 2026 lending trends for credit unions, you can align your strategy accordingly. Below, we’ll outline these trends and explore several tactics to help you cut costs while preserving a top-notch member experience.

Table of Contents

Credit Costs 2026: Mortgage Origination Expenses Continue to Rise

Mortgage credit report costs have climbed sharply again in 2026. According to a recent report from HousingWire, these costs rose by as much as 45% to 50%. It marks the fourth consecutive year of rising credit costs for mortgage lenders.

Increasing costs are due to a combination of factors, including:

FICO’s pricing changes, including its shift in pricing structures
Bureau-level fee adjustments from Experian, Equifax, and TransUnion
The ban on trigger leads, expected to take effect in March 2026
Rising compliance costs related to new credit models

These elevated costs reduce credit unions’ margins, forcing them to charge members higher rates or fees, tighten their credit thresholds, or invest less in new member services. Ultimately, these tradeoffs make it more difficult to offer competitive loan products and a stellar member experience.

Why 2026 Requires New Credit Union Mortgage Strategies

For several years, large lenders and credit unions alike have attempted to offset rising credit reporting costs by reducing spending in other areas. For example, they may slash their marketing budget or slow their hiring initiatives.

However, this cost-cutting strategy is hitting a breaking point in 2026. Rather than streamlining expenses elsewhere, credit unions should focus on optimizing their credit pull processes. They can cut back on unnecessary reports and FICO fees by leveraging the following solutions:

Smart Select – Smart Select helps you take unqualified applicants out of the running using the least number of credit bureau files possible. It does so by assessing applicants based on a single-file report first, and only upgrading reports for applicants who meet your predefined, minimum credit thresholds. It works with soft and hard pull reports.
Flex ID – Data entry errors can quickly inflate your credit reporting costs if you’re not careful. Fortunately, Flex ID can act as an extra set of eyes, verifying key borrower information (name, address, date of birth, Social Security number, etc.) before you initiate a credit pull. If your input data is inaccurate or fraudulent, the order won’t go through, saving you money and strengthening your Red Flag compliance.
Cascade VOE – Cascade VOE takes the manual stress out of income and employment verifications. After curating your preferred list of instant-hit and consumer permission data (CPD) vendors, this solution cycles through them until it returns a hit. If you arrange your preferred vendors in order of cost, you can verify applicants for the lowest amount possible every time—all without lifting a finger.
SmartPay – Smart Pay helps lenders collect credit reporting costs from their borrowers upfront by enabling them to pay their credit report fees online. It’s quick, easy, and totally transparent.

FHFA Credit Reporting Requirements: What’s Changing in 2026 and Why It Matters

One of the most significant shifts of 2026 is the Federal Housing Finance Agency (FHFA)’s move to expand lender choice in credit scoring models. Historically, conventional mortgages relied almost exclusively on Classic FICO scores, but as of mid-2025, the FHFA has approved lenders to use either:

Classic FICO, or
VantageScore 4.0

FICO 10T has also been approved for future use, but it’s still moving through the validation process.

Motivations for the FHFA Updates 2026 for Lenders

The Credit Score Competition Act of 2018 requires the FHFA to evaluate and validate new credit scoring models. This legislation was designed to promote more competition among credit scoring model providers, expand access to credit, and improve predictive accuracy in mortgage underwriting.

VantageScore 4.0 and FICO 10T help achieve these goals. Most notably for credit unions, they can help score members who were previously “unscorable” due to thin credit files. That’s because they incorporate the following expanded data sets:

Rent and utility payments – Some low- to moderate-income earners may have little or no traditional credit history. Fortunately, their rent and utility payments can showcase their creditworthiness with these new scoring models.
Trended data – Trended data analyzes applicants’ credit behavior over time, providing a fuller picture of their financial habits and potentially improving scores for members who might otherwise appear risky under Classic FICO.

Once these models are fully integrated by Fannie Mae and Freddie Mac, their automated underwriting systems (Desktop Underwriter and Loan Product Advisor) may approve borrowers who previously fell short of Classic FICO’s thresholds, boosting credit unions’ borrower pool and giving historically underserved members a real shot at homeownership.

FHFA Updates 2026 for Lenders: Preparation Requirements & Challenges

While the new credit reporting requirements will likely benefit credit unions and members alike, they also introduce some added operational complexities. After all, credit unions will need to confirm that their:

Loan origination system (LOS) supports the new scoring models
Credit-pull strategy aligns with new scoring options
Secondary marketing and pricing systems can incorporate updated scores
Disclosures and compliance workflows are updated accordingly

This prep work can take time and place strain on credit unions’ internal teams, so the earlier credit unions start the process, the better.

The 2026 Lending Environment: Balancing Rising Costs and Market Pressures

Credit score changes aren’t the only shift shaping the 2026 mortgage market. Some other notable factors include:

Slow-but-steady purchase volume
Cautious refinance activity
Elevated cost-to-produce per loan, particularly for small lending teams
Rising member expectations for speed and transparency
Competition from digital lenders who are more likely to optimize their credit pull timing

In light of these market conditions, credit unions must do more with less to ensure a satisfactory member experience.

Smart Credit Strategies to Adopt in 2026

So, how can you ensure your credit union’s success in 2026? Here are a few tactics to help you do just that:

Optimize your credit pull workflows – Not every member that applies for a mortgage needs a tri-merge right away. By using single-bureau reports, soft pulls, and attribute-based prequalification strategically, you can slash your upfront credit costs.
Control when you pull credit to reduce fallout – Pulling credit too early can increase your risk of loan fallout. To streamline your costs, delay report upgrades until a member shows strong intent and a sufficient baseline of eligibility.
Eliminating duplicate orders with automation – Manual credit report ordering and misaligned LOS rules often result in repeat credit pulls. For example, inputting incorrect applicant information can lead you to purchase the wrong report, forcing you to reorder the right one and absorb the duplicate fees. Automated tools like Flex ID and Smart Select reduce these errors by validating data upfront and reserving tri-merge pulls for applicants with established eligibility.
Employ data-driven pricing recapture strategies – Lastly, you must employ proactive measures to prevent margin erosion. For instance, SmartPay can help you pass eligible credit reporting fees onto members upfront, facilitating fast, fair cost recapture.

How Certified Credit Supports Credit Unions

At Certified Credit, we work closely with credit unions across the country to help them cut costs and optimize their workflows. If you want to reap these benefits, simply leverage some of our innovative solutions, like SmartSelect, FlexID, SmartPay, and Cascade VOE.

By partnering with Certified Credit, you’ll also receive personalized, expert guidance from our workflow optimization specialists. As you integrate new solutions, they can help you:

Audit your current workflows to uncover hidden cost leakage
Employ credit pull optimization to cut costs, enhance accuracy, and expedite decisions
Automate key processes so you can maintain your member-first focus

An Action Plan for Credit Unions Heading Into 2026

Whether or not you choose to partner with our team, you can set your credit union up for success this year by following this five-step action plan:

Review your 2025 credit spend and pull configurations
Confirm that your LOS rules reflect your current strategy
Identify where you can strategically employ more soft pulls or single-bureau files
Ensure that you satisfy all FHFA-related data quality and disclosure requirements
Schedule a conversation with your current credit provider before Q2 to talk strategy

Turn 2026’s Challenges Into Your Credit Union’s Strategic Advantage

In summary, the coming year will bring higher input costs and new credit reporting requirements. However, it also presents new opportunities for credit unions that prepare in advance and adopt savvy solutions.

Put simply, the credit unions that thrive in 2026 won’t be the ones that absorb higher costs, they’ll be the ones that redesign their workflows around them. Certified Credit is here to help you do just that.

If you’re ready to prepare your credit strategy for 2026, schedule a consultation with our team today!

Sources:

HousingWire. Mortgage credit report costs could jump 50% in 2026.

https://www.housingwire.com/articles/mortgage-credit-report-costs-2026/

FTC. Red Flags Rule.

https://www.ftc.gov/business-guidance/privacy-security/red-flags-rule

FICO. Where Things Stand for FICO® Score 10T in the Conforming Mortgage Market.

https://www.fico.com/blogs/where-things-stand-fico-score-10t-conforming-mortgage-market