True or False: A disputed account that is paid in full requires the loan to be downgraded.

The statement is false because a disputed account that has been paid in full does not automatically necessitate a downgrade of the loan. When a borrower pays off a disputed account, it means that they have resolved the matter and fulfilled their obligation, which is generally viewed positively by lenders.

In the context of USDA Rural Housing Loans, the focus is primarily on the borrower's ability to repay the loan and their overall creditworthiness. If the account is no longer disputed and is marked as paid, it indicates that the borrower has taken steps to rectify any previous issues. This resolution can actually support their application rather than hinder it.

While lenders may have specific policies regarding how various accounts impact credit assessments or loan classifications, a fully resolved and paid dispute tends to be treated favorably. This is particularly true if it does not reflect negatively on the borrower's credit score. Hence, a downgrade is not typically warranted in such situations.