I'm using a word list that I found online and checked real quick: both "color" and "colour" are on there (as are "neighbor" and "neighbour" - seems it's pretty consistent in allowing UK and US spellings), so you can use both variants!
As for which is preferable in-game: "color" is easier to spell, since it doesn't require you to have a "u", but "colour" is a longer word, so it would give you more points and extra letters!