For small business owners in Georgia, securing financing for marketing purposes can be pivotal in enhancing brand visibility and driving sales growth. With the right loan, businesses can execute marketing strategies that lead to increased customer engagement and revenue. Understanding the various options available, eligibility criteria, application processes, and best practices can significantly improve the chances of obtaining favorable loan terms. This comprehensive guide delves into the best small business loans for marketing in Georgia, offering detailed insights to help business owners make informed decisions.

What Are the Best Small Business Loans for Marketing in Georgia?

The best small business loans for marketing in Georgia include options like traditional bank loans, online lenders, and SBA loans, each catering to different business needs and credit profiles. These loans can finance digital advertising, print campaigns, and brand development initiatives.

Overview of Loan Options

In Georgia, small businesses have access to various loan options specifically geared towards marketing efforts. Traditional bank loans often provide lower interest rates but require strong credit and collateral. Online lenders offer faster processing times and more flexible requirements, while SBA loans combine favorable terms with government backing, making them an attractive choice for many business owners.

Criteria for Selection

When choosing the best small business loan for marketing in Georgia, consider factors such as interest rates, repayment terms, processing times, and lender reputation. Additionally, evaluate how the loan aligns with your marketing objectives, whether it be digital advertising, social media campaigns, or traditional marketing methods.

Importance of Marketing Loans

Marketing loans play a crucial role in the growth trajectory of small businesses. Adequate funding allows for the execution of comprehensive marketing campaigns that can increase visibility, attract new customers, and ultimately drive sales. Without sufficient marketing resources, businesses may struggle to compete in a crowded marketplace.

How Do Small Business Loans Work?

Small business loans work by providing funds to entrepreneurs to finance various business needs, including marketing. Borrowers must repay the loan over a specified period, typically with interest, based on the terms agreed upon with the lender.

Understanding Loan Types

There are several types of small business loans available, including term loans, lines of credit, and equipment financing. Term loans provide a lump sum that is repaid over time, while lines of credit offer flexible access to funds as needed. Each loan type serves different business purposes and has unique qualification requirements and repayment structures.

Application Process

The application process for small business loans generally involves submitting personal and business financial information, a detailed business plan, and other documentation. Lenders assess these details to determine creditworthiness and loan eligibility. It’s essential to be thorough and accurate during this process to avoid delays or denials.

Loan Terms and Conditions

Loan terms and conditions can vary significantly among lenders. Key aspects include the interest rate, repayment period, and any associated fees. Understanding these terms is crucial for borrowers to ensure they select the best loan option that aligns with their financial strategy and marketing goals.

What Types of Small Business Loans Are Available in Georgia?

In Georgia, small businesses can access a variety of loan types, including traditional bank loans, online financing options, and SBA loans, each tailored to different business needs and circumstances.

Traditional Bank Loans

Traditional bank loans are often preferred due to their lower interest rates and longer repayment terms. However, they typically require strong credit scores and may involve a lengthy approval process. Businesses must demonstrate financial stability and provide collateral to secure these loans.

Online Lenders

Online lenders have gained popularity for their streamlined application processes and quicker funding times. While they may offer more flexible eligibility criteria, interest rates are often higher than those of traditional banks. This option is ideal for businesses that need rapid access to funds for immediate marketing initiatives.

SBA Loans

The Small Business Administration (SBA) offers loans that are partially guaranteed by the government, making them an attractive option for small businesses. These loans usually feature favorable terms, including lower interest rates and longer repayment periods, but require a solid business plan and documentation.

What Are the Eligibility Requirements for Small Business Loans?

Eligibility requirements for small business loans typically include factors such as credit scores, business revenue, and the length of time in business, which lenders use to assess risk and determine loan terms.

Credit Score Requirements

Most lenders have specific credit score thresholds that applicants must meet to qualify for a loan. A higher credit score not only increases the chances of approval but can also lead to better interest rates and loan terms. It’s advisable for business owners to check their credit scores before applying and take steps to improve them if necessary.

Business Revenue Criteria

Lenders often require proof of consistent revenue to demonstrate the business’s ability to repay the loan. This usually involves providing financial statements, tax returns, and bank statements. A strong revenue history can significantly enhance approval chances and terms offered.

Time in Business

The length of time a business has been operating is a critical factor in loan eligibility. Lenders prefer established businesses, as they are generally seen as lower risk. Startups may face stricter scrutiny and could be required to provide additional documentation or a detailed business plan.

How Can Small Business Loans Be Used for Marketing?

Small business loans can be utilized for various marketing purposes, including funding digital marketing campaigns, traditional advertising efforts, and brand development initiatives that enhance market presence.

Digital Marketing Campaigns

With the rise of online business transactions, digital marketing has become crucial for small businesses. Loan funds can be allocated towards search engine optimization (SEO), pay-per-click advertising, content marketing, and social media advertising, helping businesses reach wider audiences effectively.

Traditional Advertising

Despite the digital shift, traditional advertising methods, such as print ads, billboards, and radio spots, remain effective for many businesses. Marketing loans can finance these efforts, allowing businesses to maintain a balanced marketing strategy that appeals to diverse customer segments.

Brand Development

Building a strong brand identity is essential for long-term success. Marketing loans can assist in developing logos, websites, and marketing collateral that resonate with target audiences. Investing in brand development can lead to increased customer loyalty and recognition in the marketplace.

What Is the Average Interest Rate for Small Business Loans in Georgia?

The average interest rate for small business loans in Georgia varies based on the lender and type of loan, typically ranging from 4% to 10% for traditional loans and potentially higher for online financing options.

Factors Influencing Interest Rates

Interest rates are influenced by several factors, including the applicant’s creditworthiness, the type of loan, the lender’s policies, and market conditions. Businesses with excellent credit and a solid financial history can often secure lower rates, while those with poor credit may face higher costs.

Comparing Rates Across Lenders

It is essential for business owners to compare interest rates from multiple lenders to find the most favorable terms. Utilizing online comparison tools can help streamline this process, ensuring that borrowers make informed choices regarding their financing options.

How to Secure Lower Interest Rates

To secure lower interest rates, business owners can improve their credit scores, increase their business revenue, and provide a solid business plan. Additionally, establishing a relationship with lenders and negotiating terms can lead to more favorable rates.

What Are the Benefits of Using Small Business Loans for Marketing?

Utilizing small business loans for marketing offers several benefits, including boosting brand awareness, increasing sales opportunities, and enhancing customer engagement through targeted initiatives.

Boosting Brand Awareness

Effective marketing campaigns funded by loans can significantly increase brand awareness. By reaching more potential customers through various channels, businesses can establish a strong market presence, leading to higher engagement and sales conversions.

Increasing Sales Opportunities

Investing in marketing can directly impact sales by attracting new customers and retaining existing ones. A well-executed marketing strategy can generate leads and drive customer traffic, ultimately resulting in increased revenue for the business.

Enhancing Customer Engagement

Marketing loans enable businesses to implement strategies that foster customer engagement, such as social media interactions, email marketing campaigns, and promotional events. Engaging with customers effectively can build loyalty and lead to long-term business relationships.

How Do I Choose the Right Lender for My Marketing Loan?

Choosing the right lender for a marketing loan requires thorough research on lender reputation, understanding fees and charges, and evaluating customer service to ensure a smooth borrowing experience.

Researching Lender Reputation

Before selecting a lender, it’s crucial to conduct research on their reputation. This can involve reading customer reviews, checking ratings on platforms like Better Business Bureau (BBB), and asking for recommendations from other business owners. A reputable lender will have a track record of fair practices and reliable customer support.

Understanding Fees and Charges

Loan fees can vary significantly among lenders and can include origination fees, late payment penalties, and prepayment penalties. It’s important for borrowers to carefully review the fee structure and calculate the total cost of the loan to avoid unexpected expenses down the line.

Evaluating Customer Service

Assessing the level of customer service provided by a lender can greatly impact the borrowing experience. Good customer service includes clear communication, responsiveness to inquiries, and support throughout the application process. A lender that prioritizes customer satisfaction can make a significant difference during the loan term.

What Are the Common Mistakes to Avoid When Applying for Small Business Loans?

Common mistakes when applying for small business loans include underestimating the required loan amounts, neglecting to prepare financial documents, and overlooking critical loan terms, all of which can hinder approval chances.

Underestimating Loan Amounts

Many business owners make the mistake of underestimating the amount of funding they need for their marketing efforts. It’s important to conduct thorough market research and budget planning to ensure that the loan amount aligns with marketing goals and business needs.

Neglecting to Prepare Financial Documents

Failure to prepare comprehensive and accurate financial documents can lead to delays or denials in the loan application process. Business owners should gather necessary financial statements, tax returns, and other relevant documents in advance to streamline their applications.

Ignoring Loan Terms

Ignoring the fine print of loan terms can result in unexpected challenges later on. Borrowers should make a habit of closely reviewing all loan agreements, understanding repayment schedules, and being aware of any fees or penalties associated with the loan.

What Documentation Is Required for Small Business Loan Applications?

Documentation required for small business loan applications typically includes a business plan, financial statements, and legal documentation to verify the business’s legitimacy and financial health.

Business Plan Essentials

A well-structured business plan is often essential for securing a small business loan. It should include an overview of the business model, target market, marketing strategies, and financial projections. A compelling business plan can demonstrate viability and attract lender interest.

Financial Statements

Key financial statements such as profit and loss statements, cash flow statements, and balance sheets provide lenders with insight into the business’s financial health. Accurate and up-to-date financial records are crucial for assessing creditworthiness and loan eligibility.

Legal Documentation

Legal documentation may include business licenses, registrations, and any contracts relevant to the business operation. Lenders require this information to verify the legitimacy of the business and ensure compliance with local regulations.

How Long Does It Take to Get Approved for a Small Business Loan?

Approval times for small business loans can vary widely depending on the lender and loan type, ranging from a few days for online lenders to several weeks for traditional bank loans.

Factors Affecting Approval Time

Several factors can influence the approval time for a small business loan, including the completeness of the application, the lender’s processing speed, and the complexity of the loan request. Providing thorough and accurate documentation can help expedite the process.

Typical Timeframes by Lender

Online lenders often provide quicker approval times, typically within a few days, while traditional banks may take 2-6 weeks due to more rigorous evaluation processes. SBA loans might take even longer, sometimes up to several months, due to additional paperwork and scrutiny.

Expediting the Process

To expedite the loan approval process, borrowers should prepare all necessary documents in advance and ensure they meet the lender’s eligibility criteria. Clear communication with the lender throughout the application can also help address any potential issues promptly.

What Are the Alternatives to Small Business Loans for Marketing?

Alternatives to small business loans for marketing include grants and competitions, crowdfunding options, and utilizing personal savings or investments, each offering unique benefits and considerations.

Grants and Competitions

Business grants and competitions can provide funding without the burden of repayment, making them attractive options for marketing. However, these opportunities often come with specific criteria and competitive application processes, requiring businesses to showcase their potential effectively.

Crowdfunding Options

Crowdfunding platforms allow businesses to raise capital from a large number of individuals, often in exchange for rewards or equity. This method can also serve as a marketing tool, increasing brand visibility and customer engagement as businesses promote their campaigns.

Personal Savings and Investments

Using personal savings or investments can provide immediate access to funds without the need for loans. However, this option carries personal financial risk and may not be feasible for all business owners. Careful consideration is necessary to weigh the pros and cons of this approach.

What Role Does a Business Plan Play in Securing a Loan?

A business plan plays a crucial role in securing a loan by outlining the business model, market strategy, and financial projections, providing lenders with the information needed to assess viability and risk.

Essential Components of a Business Plan

An effective business plan should include an executive summary, business description, market analysis, organizational structure, and financial projections. Each component should clearly convey the business’s goals and how it intends to achieve them, particularly in relation to marketing efforts.

Tailoring Plans for Lenders

When applying for a loan, it’s beneficial to tailor the business plan to the specific lender’s requirements and preferences. Highlighting key financial metrics and emphasizing the marketing strategies that will drive growth can make a compelling case for loan approval.

Using Business Plans for Marketing Loans

Marketing loans require a clear understanding of how the funds will be utilized. A detailed business plan can illustrate the potential return on investment from marketing initiatives, providing lenders with confidence in the borrower’s strategy and financial acumen.

How Can I Improve My Chances of Loan Approval?

Improving chances of loan approval involves enhancing credit scores, demonstrating revenue growth, and building strong relationships with lenders, all of which can influence lender perception and decision-making.

Improving Credit Scores

Taking steps to improve credit scores can significantly enhance loan approval chances. This may include paying off existing debts, ensuring timely payments, and correcting any inaccuracies on credit reports. A higher credit score often translates to better loan terms and lower interest rates.

Demonstrating Revenue Growth

Lenders favor businesses that show consistent revenue growth as it indicates financial health and repayment capability. Keeping accurate financial records, projecting future growth, and providing evidence of increasing sales can strengthen loan applications.

Building Strong Business Relationships

Establishing positive relationships with lenders can facilitate smoother loan applications. Regular communication, transparency, and demonstrating reliability can build trust and increase the likelihood of favorable loan terms and approvals. Networking within the community can also lead to beneficial recommendations.

What Are the Risks of Taking Out a Small Business Loan?

Risks associated with taking out a small business loan include challenges in debt management, impacts on cash flow, and the potential for loan default, which can have serious repercussions for the business.

Debt Management Challenges

Managing debt can be challenging, especially if the business experiences fluctuations in revenue. Mismanaging loan repayments can lead to financial strain and affect overall business operations. It’s essential for business owners to create a realistic repayment plan and budget accordingly.

Impact on Cash Flow

Taking on debt can impact cash flow, as monthly loan repayments reduce available capital for operational expenses and investments. Business owners should carefully consider their cash flow projections and ensure they have sufficient funds to cover both loan payments and ongoing expenses.

Potential for Loan Default

Failure to repay a loan can lead to severe consequences, including damage to credit scores, legal actions, and loss of collateral. It’s crucial for business owners to fully understand the terms of their loans and have contingency plans in place to mitigate the risk of default.

How Do Marketing Loans Affect My Business Credit Score?

Marketing loans can impact business credit scores positively or negatively, depending on how the debt is managed and repaid, influencing future borrowing opportunities.

Understanding Credit Reporting

Business credit scores are influenced by various factors, including payment history, credit utilization, and the length of credit history. Responsible management of marketing loans, such as timely repayments, can enhance credit scores, while missed payments can lead to declines.

Positive vs. Negative Impacts

Timely repayment of marketing loans can improve a business’s creditworthiness, making it easier to secure future financing. Conversely, defaulting on loans can have detrimental effects, leading to lower credit scores and reduced access to capital.

Managing Debt Responsibly

To maintain a healthy business credit score, it is essential to manage debts responsibly. This includes staying within borrowing limits, making timely payments, and regularly monitoring credit reports to ensure accuracy. Responsible debt management can lay the foundation for future growth and financing opportunities.

What Are Some Success Stories of Small Businesses in Georgia Using Loans for Marketing?

Success stories of small businesses in Georgia that have utilized loans for marketing demonstrate the potential impact of strategic funding on growth and profitability.

Case Study: Local Retail Success

A local retail store in Georgia secured a small business loan to revamp its marketing strategies. By investing in targeted digital advertising and social media campaigns, the store saw a 30% increase in foot traffic and a significant boost in sales during the holiday season.

Case Study: Service Industry Growth

A Georgia-based service provider utilized a marketing loan to expand its outreach through local advertising and community events. This investment led to a doubling of its customer base within a year, showcasing how effective marketing can drive growth in the service sector.

Case Study: Startup Innovations

A startup in Georgia leveraged a small business loan to finance an innovative marketing campaign that utilized influencer partnerships and social media strategies. This approach not only raised brand awareness but also secured a loyal customer base, leading to sustainable growth.

What Resources Are Available for Small Business Owners in Georgia?

Small business owners in Georgia can access various resources, including state programs, local business networks, and online educational platforms designed to support growth and development.

State Resources and Programs

Georgia offers numerous programs aimed at supporting small businesses, such as the Georgia Small Business Development Center (SBDC), which provides consulting services, training, and access to funding. These resources can help businesses navigate the loan application process and develop effective marketing strategies.

Local Business Networks

Joining local business networks can provide valuable support and resources for small business owners. These networks often host events, workshops, and mentorship programs that can help entrepreneurs learn from each other and share best practices in marketing and financing.

Online Educational Platforms

Online learning platforms offer courses and resources on various topics related to small business management, marketing strategies, and financial literacy. Websites like SCORE and Coursera provide valuable knowledge and tools that can help business owners make informed decisions regarding loans and marketing efforts.

How Can I Use Social Media Marketing with My Loan Funds?

Social media marketing can be effectively funded through loan resources, allowing businesses to create impactful campaigns that engage their target audience and drive conversions.

Creating Effective Campaigns

With loan funds, businesses can develop and implement comprehensive social media campaigns that include high-quality content creation, targeted advertising, and engagement strategies. Crafting compelling campaigns that resonate with the audience can enhance brand visibility and attract new customers.

Targeting the Right Audience

Utilizing demographic and psychographic data allows businesses to target their social media marketing efforts effectively. Loan funds can be used to access advanced analytics tools that help identify and reach potential customers, maximizing the return on investment from marketing efforts.

Measuring ROI

Measuring the return on investment (ROI) for social media marketing campaigns is crucial for understanding their effectiveness. Businesses can utilize tracking tools and analytics to monitor engagement, conversion rates, and customer acquisition costs, ensuring that loan funds are being used efficiently.

What Are the Trends in Small Business Marketing Financing?

Trends in small business marketing financing indicate a shift towards digital strategies, increased reliance on data analytics, and growing interest in fintech solutions that provide flexible funding options.

Emerging Marketing Strategies

Small businesses are increasingly adopting innovative marketing strategies such as influencer partnerships and experiential marketing to engage customers. These strategies often require upfront investment, making loans a viable option for funding these initiatives.

Fintech Innovations

Fintech companies are revolutionizing the financing landscape for small businesses by offering faster approval processes, flexible repayment terms, and alternative funding sources. This innovation allows businesses to access marketing funds quickly and efficiently.

Changes in Consumer Behavior

Shifts in consumer behavior, particularly towards online shopping and digital interactions, require businesses to adapt their marketing strategies. Loans can provide the necessary funding to pivot marketing efforts and invest in technologies that meet changing consumer demands.

How Do I Calculate the Return on Investment for Marketing Loans?

Calculating the return on investment (ROI) for marketing loans involves analyzing the financial gains generated by marketing initiatives against the costs associated with the loan, providing insights into the effectiveness of the investment.

Understanding ROI Metrics

ROI can be calculated using several metrics, including increased sales revenue, customer acquisition costs, and overall profit margins. By assessing these factors, businesses can determine the financial impact of their marketing efforts funded through loans.

Tools for Calculation

Utilizing financial software and analytics tools can help streamline the ROI calculation process. These tools can track expenses, sales data, and marketing performance, providing a clear picture of the financial outcomes associated with loan-funded marketing campaigns.

Setting Realistic Goals

Setting realistic and measurable goals is essential for calculating ROI effectively. Businesses should establish clear expectations for their marketing initiatives and regularly review performance against these goals to make informed adjustments and improve future strategies.

What Should I Do if My Loan Application is Denied?

If a loan application is denied, business owners should first understand the reasons behind the denial and take steps to improve their qualifications before reapplying or exploring alternative funding sources.

Understanding the Denial Reasons

Identifying the reasons for loan denial is the first step toward addressing any shortcomings. Common reasons may include insufficient credit history, low credit scores, or inadequate financial documentation. Understanding these factors can help business owners make necessary adjustments.

Steps to Reapply

After addressing the issues that led to denial, business owners should prepare to reapply. This may involve improving credit scores, gathering additional documentation, or refining the business plan to align more closely with lender expectations.

Exploring Alternative Funding

If reapplying for a loan is not feasible or successful, exploring alternative funding options is essential. This may include seeking grants, utilizing crowdfunding, or considering personal savings, all of which can provide necessary capital without the risks associated with traditional loans.

How Can I Utilize Networking to Enhance My Marketing Strategy?

Utilizing networking effectively can enhance marketing strategies by creating valuable connections, sharing resources, and collaborating with other businesses to broaden reach and influence.

Building Connections in Georgia

Networking within the local business community can open doors to partnerships, referrals, and shared marketing initiatives. Engaging with local organizations, attending networking events, and participating in workshops can build strong relationships that benefit marketing efforts.

Leveraging Local Events

Participating in or sponsoring local events can provide excellent marketing exposure. Networking at these events allows businesses to connect with potential customers and establish their presence within the community, leading to increased brand awareness and customer loyalty.

Collaborating with Other Businesses

Collaborating with complementary businesses can enhance marketing strategies and expand reach. Joint marketing campaigns, cross-promotions, and shared events can create win-win situations that benefit all parties involved and attract new customers.

What Are the Tax Implications of Small Business Loans?

Tax implications of small business loans include interest deductibility, specific tax reporting requirements, and the importance of consulting with a tax professional to ensure compliance and optimize tax strategies.

Interest Deductibility

Interest paid on business loans is generally tax-deductible, which can reduce the overall tax burden for small businesses. Understanding the deductibility rules and ensuring proper documentation is essential for maximizing tax benefits associated with loan repayments.

Tax Reporting Requirements

Small business owners must adhere to specific tax reporting requirements related to loans, including accurately reporting income generated from loans and interest payments. Maintaining precise financial records can facilitate compliance with tax obligations and streamline the reporting process.

Consulting with a Tax Professional

Working with a tax professional can provide valuable insights into the tax implications of small business loans. They can assist with navigating complex tax laws, ensuring compliance, and optimizing tax strategies to minimize liabilities associated with borrowed funds.

How Can I Monitor and Adjust My Marketing Strategy After Securing a Loan?

Monitoring and adjusting marketing strategies after securing a loan involves setting key performance indicators (KPIs), conducting regular reviews, and adapting to market changes to enhance effectiveness and maximize ROI.

Setting KPIs

Establishing clear KPIs is crucial for measuring the success of marketing initiatives funded by loans. These should include metrics such as customer acquisition costs, conversion rates, and return on marketing investment to evaluate performance effectively.

Regular Review Processes

Implementing regular review processes allows businesses to assess the effectiveness of their marketing strategies and make informed decisions. Analyzing performance data and gathering feedback can highlight areas for improvement and inform future marketing efforts.

Adapting to Market Changes

Staying agile and responsive to market changes is essential for sustaining marketing success. Businesses should be prepared to adjust their strategies based on shifts in consumer behavior, competitive landscapes, and emerging trends to ensure continued relevance and effectiveness.

What Are the Best Practices for Managing Loan Funds Effectively?

Best practices for managing loan funds effectively include creating a budget, tracking expenses, and maximizing marketing impact to ensure that the investment yields positive results.

Creating a Budget

Developing a detailed budget outlining how loan funds will be allocated is crucial for effective financial management. This budget should prioritize marketing initiatives, operational costs, and loan repayments to ensure that all aspects of the business are adequately funded.

Tracking Expenses

Consistent tracking of expenses related to loan-funded marketing activities is essential for evaluating ROI and maintaining financial accountability. Utilizing accounting software can streamline this process and provide real-time insights into financial performance.

Maximizing Marketing Impact

To maximize the impact of loan funds, businesses should focus on high-ROI marketing strategies and continuously evaluate their effectiveness. Investing in data analytics and customer feedback mechanisms can help refine marketing efforts and enhance overall business growth.

What Should I Know About Loan Repayment Plans?

Understanding loan repayment plans is critical for managing business finances, including aspects such as repayment terms, choosing a repayment schedule, and preparing for potential payment challenges.

Understanding Repayment Terms

Loan repayment terms dictate how and when borrowers must repay their loans. Familiarizing oneself with these terms, including payment frequency, interest rates, and total repayment amounts, is essential to avoid defaults and manage cash flow effectively.

Choosing a Repayment Schedule

Selecting a repayment schedule that aligns with business cash flow is crucial. Businesses should evaluate their revenue cycles and opt for a schedule that minimizes financial strain, such as monthly or quarterly payments, depending on their income patterns.

Preparing for Payment Challenges

Being proactive about potential payment challenges can help businesses navigate financial difficulties. This includes creating contingency plans, maintaining an emergency fund, and communicating with lenders about any issues to explore possible solutions.

Mini FAQ

What types of loans are available for marketing in Georgia?

Available loans include traditional bank loans, online lender options, and SBA loans.

How can I improve my chances of getting a loan?

Improving credit scores, demonstrating revenue growth, and preparing a strong business plan can enhance approval chances.

What are the eligibility requirements for small business loans?

Eligibility typically includes credit score requirements, business revenue criteria, and time in business.

How can I use loan funds for marketing?

Loan funds can be used for digital campaigns, traditional advertising, and brand development.

What are common mistakes to avoid when applying for a loan?

Common mistakes include underestimating loan amounts, neglecting document preparation, and ignoring loan terms.

How do marketing loans affect my business credit score?

Responsible management of marketing loans can positively impact credit scores, while defaults can harm them.