True or False? A creditor may not use receipt of public assistance as a factor in determining creditworthiness.

The statement is true because creditors are prohibited from using receipt of public assistance as a factor in determining creditworthiness according to the Equal Credit Opportunity Act (ECOA). This federal law aims to ensure that all individuals have equal access to credit without discrimination based on several protected characteristics, including the source of their income.

Using public assistance as a factor in creditworthiness could lead to discriminatory practices, as it might unfairly disadvantage those who rely on such assistance. This protection is in place to promote fair lending practices and ensure that consumers are not denied credit simply because they receive government assistance, which can vary greatly among individuals due to circumstances beyond their control.

Understanding this principle is crucial for anyone involved in lending or credit decisions, as it underscores the importance of evaluating applicants based on their overall credit profile rather than the specific sources of their income.