WHILE MOST CONSUMERS

struggle to make the minimum payments on their credit-card debt, Trent Charlton is hurriedly paying his off. Over the last six months, he has paid down more than $8,000 of his credit-card balances and plans to slash another $10,000 in the upcoming weeks.

The problem is, his credit-card companies are onto him: Whenever he makes a dent in his debt, they decrease his credit limits a move that could hurt his credit score and cause his interest rates to go up. When, six months ago, Charlton paid his American Express credit-card balance down to $14,000, AmEx decreased his limit from $20,000 to $14,300. Another payment several weeks ago brought his balance down to $10,000 AmEx then cut his limit to $10,300. AmEx has also slashed the $2,000 limit on a card he rarely uses down to $500, barely above his $300 balance. And the limit on his GE Money Card (issued by General Electric Money Bank) where he owes $7,000, was recently cut from $15,000 to $7,500.

Fearing that his other credit cards may follow suit, Charlton is doing everything he can to pay down his debt as soon as possible. He sold a gold diamond ring that he never wore and listed his BMW 335I, leased in April 2007, on SwapaLease.com, looking for someone to take over his contract. "Maybe it was a knee-jerk reaction, but when [the credit-card companies] started dropping my limits, it really scared me," he says. "I felt like I was standing on loose sand and I needed to get my finances in order."

That's exactly what the credit-card companies are counting on. Faced with a growing wave of delinquencies, they're tightening lending standards considerably, focusing on card members they perceive at highest risk of default. (Chasing balances the industry term for lowering a customer's credit limit as they pay down their balance is one way to control that risk.) Unfortunately, these days lenders are expanding the definition of high risk to include many consumers who would have been considered good customers just months ago. Now, cardholders can be subject to greater scrutiny based on where they live or what type of business they run.

In a recent presentation before investors, American Express CEO Kenneth Chenault said the company is "implementing targeted line reductions for specific segments of our portfolio representing the greatest risk," including card members "holding subprime mortgages and small businesses operating in specific industries, such as mortgage companies, home builders and construction-related businesses." Furthermore, he noted that the company is "adjusting credit models to reflect the higher probability of default that exists during a weaker economy, and in geographies that have been most impacted by home price declines."

Kim Ford, an American Express spokeswoman, says that such factors aren't "decisive," as the company always looks at a card member's overall profile.

For Charlton, who lives in Irvine, Calif. an area he describes as "right in the middle of foreclosure central" the idea of being under even more scrutiny is daunting. He says he hasn't had a late payment in more than three years, but his credit score is in the 675 range: a number his creditors may frown upon, as scores below 680 can be considered borderline-prime.

American Express isn't the only company hardening its approach toward card members. Emily Davidson, a financial expert with consumer information web site

, says she's received "tons of reports" from Bank of America customers complaining about unexplained rate hikes of 10 to 20 percentage points. "The majority say they've never been late [with a payment]," she notes.

One such customer is Eric Fresch, an engineering consultant in Sandusky, Ohio, whose BofA interest rate recently jumped from 17% to 27%. Fresch admits that he occasionally runs up high balances when purchasing equipment for his business, but it never seemed to be an issue at least not in the past five years. His credit score is in the high 600s, however, and he purchased a second home in 2005, during the height of the real estate boom. (With many of the loans taken out during that period now at risk of default, this entry in his credit report could be a red flag in some lenders' eyes.) Since the rate hike on his credit card, Fresch has promptly paid down the full balance and plans to close the account soon.

Betty Riess, a Bank of America spokeswoman, says the bank reviews individual accounts for risk "periodically." If a customer receives a rate increase, it's due to "deterioration in credit, based on the criteria we review, both the credit profile with us, as well as external credit criteria," which includes taking out numerous loans, running up high balances or defaulting on loans with other lenders. She says it does not include geography.

If you look closely at BofA's credit-card term agreement, however, you'll find a clause that allows the lender to change your terms due to "general market conditions" as well, says Curtis Arnold, founder of CardRatings.com, a consumer information web site. Other large banks, including Chase and Citibank, also use that language. Granted, it's not a new addition to the Terms and Conditions that all consumers agree to when they start using their credit cards, but with market conditions decidedly unfavorable for consumers right now, it's certainly something to be aware of, Arnold says.

"It's a snowball effect," says Arnold. "The more the financials hurt, the more they squeeze their customers, the more their customers hurt."

Here are three little-known red flags that may cause your creditors to tighten their grip on your finances.

Activating a long-unused card

Credit-card companies used to love it when a card member re-activates a long-unused card. But given the lending environment, it's now a red flag, says Dennis Moroney, senior research analyst at market research firm TowerGroup. "There's an enormous amount of cards that are inactive. Now, as people are running out of options, they're activating these cards and running up balances and, ultimately, delinquencies," he explains.

Living in foreclosure central

Owning a home in a foreclosure-plagued area or one where property values have dropped significantly is, as your creditors see it, exposing them to too much risk that you'll soon run into mortgage trouble yourself. They can't necessarily discriminate against particular neighborhoods or regions when it comes to extending new credit, as rejecting applications based on where you live could be considered redlining, an illegal practice, says John Ulzheimer, president of Credit.com Educational Services. But that's not a concern when it comes to existing customers. "Most lenders will look into geographies they perceive to be high-risk as part of their regular account-review practices," Ulzheimer notes.

Running a small business

Consider yourself warned if you own a business that has anything to do with the real estate or mortgage markets. In addition to that, small-business owners often run up large balances an easy excuse for the creditors to slash your limits or hike your rates.