Credit allows people to purchase things beyond their current wealth but rather within their future means to pay (their future productivity and trustworthiness). This is particularly useful for those who aren't born into wealth: Credit is practically the only way for normal folks to access productive capital, such as a home that allows you to avoid paying rent, or an education that in theory makes you more productive in the future.
You are correct to point out that the prediction of one's future ability to pay (their future productivity and trustworthiness) is difficult. But I think eliminating credit (at least when used to purchase productive capital) is throwing the baby out with the bath water.
You are correct to point out that the prediction of one's future ability to pay (their future productivity and trustworthiness) is difficult. But I think eliminating credit (at least when used to purchase productive capital) is throwing the baby out with the bath water.