[quote name='Katie' timestamp='1305713502' post='4812430']
Erm -- it happens in Europe as well...
You just probably don't know about it so much because a lot less people deal with the agencies directly.
Depends.
Most of the time, when taking a loan or mortgage, the approval is checked individually and you must prove that you will be able to pay back (6 month salary history, employment record + 1 or 2 "witnesses" that will pay back the debt if something happens to you). In addition, any loan debts are most often automatically deducted from your paycheck, so nonpayment is a non-issue unless you do go bankrupt and the people covering for you do so as well.
If you don't have the above in advance, you won't be able to get a loan at all. Credit cards matter much less and the limits tend to be very strict so your payment history matters much less, once you hit the 200 or 500 EUR initial limit (first 2 or so years) it's simply blocked until you repay (see automatic deduction) or you default.
While credit scores might be kept internally for increases in limits, I don't recall hearing people having trouble with actual "credit score" for credit cards or bills. The biggest limiting factor will be full-time employment salary and your employer's approval.
In many ways this is quite annoying. If starting your own business, not having full-time job, being a student, getting first job or similar you can basically forget about a standard loan and a mortgage obviously requires property.
YMMV, these systems are changing, but for typical "working man" the credit will usually be managed very conservatively and safely as far as banks are concerned. Most people will never take anything riskier so their credits will remain within safe limits determined by bank.
Europe is also diverse, lots of differences between countries and UK might be a bit more US-like, continental tends to be somewhat conservative. Anything debt or credit related will tend to be tied to salary.
[/quote]
Sounds biased in favor of the lender and employer, less in favor of the individual. It seems to also ignore the benefits of risk and reward.
Much of that is similar in the US; you need to establish good credit to get credit, and you need to convince the lender that you can repay the bills by showing proof of income.
In the US you don't generally need someone to co-sign the loan (what you called a witness) unless you have poor credit or no proof of income. A positive credit history is easily established on your own without assistance.
And you certainly don't need your employer's approval. That seems draconian. Your employer has no need to know what you do with the rest of your life. Anything unrelated to the work you perform on the job is out-of-bounds for employers. Having the employer pay your creditors directly places way too much knowledge and power in the hands of your boss. It also tends to force people to work for established sources, instead of allowing contract work and other private enterprise.
Those credit limits are extremely tiny in comparison. A 200 Euro limit for two years seems crazy. Why even bother with credit at that point?
On the one hand yes, it is safer for the lenders if they have these guarantees. On the other hand, as you pointed out, this ties the hands of the individuals and makes it difficult for recent graduates to surge ahead, difficult for entrepreneurs, and difficult for "disruptive growth" that tends to have extra risk but also tend to transform fields for the better.
The rules you described would tend to just reinforce the status quo. Those who have can have more, those who don't cannot. Where is the ability to task risks, and to balance risk vs reward?