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Credit utilization is a critical aspect of your credit profile, accounting for approximately 30% of your credit score. It reflects the percentage of available credit that you are currently using, which is calculated by dividing your total balances by your total credit limits. An ideal utilization rate falls between 1% and 3%, as anything higher, such as the industry standard of 30%, may hinder your credit score from improving. Monitoring this ratio closely is essential, especially when preparing to apply for new credit, as it can significantly impact your borrowing power.