If a bank wanted to raise rates, the bank could just raise rates. They don't do that because, if they raise them excessively, competing banks will undercut them. This same reason prevents them from using Snidely Whiplash Credit Scores ("Everyone gets a 20! BWA HA HA!"): if SWCS predicts defaults worse than FICO does, then competing banks will use FICO and steal the borrowers for whom FICO is more predictive than SWCS, letting EvilBank attempt to raise rates on the dregs of the barrel.

Yes, it's only an issue inasmuch as it's (nearly) uniformly applied. i.e. the risk is mostly of FICO scores being weighted by 'social' factors.

And my optimism that new more-accurate ratings agencies will appear to compete with profitably-wrong ratings agencies went out the window with the CDO mess.

Well exactly.

Let them use whatever the hell they want. Either they'll be right (and have a useful credit rating score) or they'll be wrong, and lose custom to other banks. That's how a market works.

You have no God-given right to credit. You have access to as much credit as someone wants to offer you, and they compete each other such that the rates you get offered reflect the market-thinking of normal profit (as compared to super-normal profits) + default costs.

Of course you have no god-given anything, that's ridiculous. And so is the concept of rights.

But you do have a reasonable expectation as a citizen of a country that your common tax/output funded currency will be available to you on the same terms it is to others. Otherwise, why would you contribute to/use it?

This is already not the case in most places as all lending is done through predatory monopolies with privileged access to the central bank, and a central bank financed via government subsidy but outside of government (the people's) control.

Already we've got a toxic system that's not of much use to the people who pay for it.

part of it is advertising...this way they can advertise 1.9% APR* (with good credit) and give everyone else 9.5%

9.5% is pretty damn good in Europe, I haven't really seen low APRs here. Plus, grace periods are a rarity(more exactly I do not know of any Nordic nor Eastern European banks which would offer them). You use the credit card and you pay the interest from the moment you put something on the card.

I think US has the most competitive credit card enviroment.

I think you'd have to compare the various fees and fine print as well. The US has a great credit card environment for people who don't actually ever need credit.

It becomes considerably less great for people who use those cards as anything other than a lower-risk debit card.