Reputation would not be anything formal. For each public keys, there would be some data about successful or failed loans.
It's up to you to use this data and give a credit rating.
And yes, every one would start from a "zero reputation".
By the way, such a system has already started on #bitcoin-otc.
Interesting. So then, in that case, perhaps such a CU doesn't deal with totally new keys with no reputation just like a bank or traditional CU wouldn't be quick to deal with a new loan applicant with no credit. Perhaps some sort of algorithm that figures in the age of a key and the plus/negative for repaying other loans could be used to develop a risk model. Definitely interesting. I'm going to read up a bit on trust systems tomorrow and see how this might be doable in an anonymous way.
Thanks for the great comments...
Anthony