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Credit scores can feel intimidating—but understanding what they represent and how they’re used can remove much of the stress. During National Credit Education Month, Ty Osterhout, AVP/Area Retail Banking Manager, shares practical insight into what credit scores really mean, how lenders evaluate them, and why they’re only part of the financial picture.

Osterhout explains that one of the biggest misconceptions he hears from customers is believing the score alone determines approval. “A common misunderstanding is that your credit score is the only thing that determines whether you qualify for a loan,” he says. “In reality, the score is just one part of the overall picture.”

A credit score is a three-digit number used as an indicator of how likely you are to repay a loan on time. It reflects how you’ve handled credit in the past—making payments on time, how much debt you carry, and how long you’ve had established credit.

But when reviewing a loan application, lenders look beyond that number. They also evaluate:

Payment history– Are payments made consistently and on time?

Debt-to-income ratio– How much of your monthly income is already committed to existing debt?

Employment history– Is your income stable and reliable?

Down payment– How much cash are you contributing up front?

Collateral value– For secured loans, does the asset support the loan request?

“When we make a lending decision,” Osterhout adds, “we review the entire financial picture—not just one number.”

What Counts as a Strong Credit Score?

While scoring models vary slightly, Osterhout notes that a score of 740 and above is generally considered strong for someone applying for a loan or mortgage. Borrowers in this range often qualify for more competitive rates and terms.

However, he emphasizes that perfection is not required. “You don’t need a perfect 850 to qualify for the best loan rates and terms. Generally, borrowers with scores of 800 and above receive the most favorable offers.”

How Your Score Impacts Your Loan

Even a modest difference in credit score can affect your long-term costs. Osterhout shares a side-by-side example of two borrowers applying for the same $100,000 fully amortized, fixed-rate loan over 10 years:

Borrower A: 800 credit score at 7.42% interest
Monthly payment: $1,182.85

Borrower B: 680 credit score at 8.67% interest
Monthly payment: $1,248.97

“That’s about $66 more each month,” Osterhout explains, “and nearly $8,000 more in total interest over the life of the loan.”

This example highlights how improving your credit score, even by 20, 40, or 60 points—can make a meaningful financial difference.

Your Credit Score Is a Work in Progress

For customers who feel discouraged by a less-than-perfect score, Osterhout offers reassurance. “It’s important to remember that a credit score is always a work in progress. A lower score today doesn’t mean it will stay that way.”

Consistent, on-time payments and responsible credit use can significantly improve a score over time. Reducing outstanding balances, avoiding excessive new credit inquiries, and maintaining steady employment all contribute to strengthening your overall financial profile.

Building Confidence Through Education

Understanding your credit empowers you to make better financial decisions. Reviewing your credit report regularly, asking questions about loan options, and working with a trusted banking professional can help you move forward with confidence.

As Osterhout reminds customers, lending decisions are more than just a number—they’re about your full financial story.

First Fed customers can access Savvy Money and its credit tools through online banking. Additionally, the Consumer Financial Protection Bureau offers free educational materials on credit reports, scores, and building credit.

Member FDIC | This is for informational purposes only and does not constitute legal, tax, or other financial advice. Consumers should seek the advice of a financial advisor/professional, tax consultant, or legal counsel for their specific needs.