Banks have a reporting system for accounts called ChexSystems. When they implement this system it does not affect your consumer credit rating, but a negative account balance can appear on your credit history in a few circumstances. Therefore, you should not risk your credit rating by assuming that your banking history cannot affect your ability to obtain credit.
Effect
The major credit bureaus do not track banking history or account balances, so a negative balance does not have an immediate effect on your credit rating. However, the bank can send the debt to a collection agency, sue you, or charge off the debt and report it to credit bureaus. If the balance appears on your credit history, it indicates a seriously negative account and can lower your score by dozens of points.
Considerations
While banking history does not directly affect credit, a negative balance can reduce the number of credit offers you receive from your bank. Banks often send credit offers to customers that have a long, positive history with the institution, so overdrawing could put a stop to those offers. This could be especially harmful if you have a short credit history, or none, and hoped to use your relationship with your bank to leverage a first credit card.
Preventing Overdrafts
Ideally, you should keep an eye on your account balance so that you never withdraw more money than you have. However, banks usually offer overdraft protection services with a small line of credit to buffer an overdraft. You can also link accounts at the same banking institution for a smaller fee, suggests the Federal Deposit Insurance Corporation.
Warning
Banks often check your credit history if you request overdraft protection because they consider it a small loan. A credit inquiry incurs between zero and five points of damage to your credit score. This may not seem like much, but more than six inquiries within a year is a red flag to lenders. The bank may also perform a credit check if you need to open a new account.
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