Mortgage and Insurance

I just found these forums and am so excited to get started on my credit rebuilding journey!  Long story short, my husband and I spent our college years opening credit cards and not making on-time payments.  We closed everything down in 2005 when we got married and started making payments through a credit management agency and made our last payment this month.  I then pulled our credit reports and was a bit disheartened to see that our scores were 548 and 530.  There were 3 collections accounts for small outstanding bills (2 through afni, which I paid yesterday) and 1 which was paid off in 2005 but subsequently sold to a collections agency (Asset Acceptance LLC) who claims that I owe them $2500, and which is scheduled to remain on record until July of 2010. We currently have no open credit cards.

 

Other than those accounts and some student loans that have been in forbearance (just pulled out, first payments are due in April/2010), everything has been paid on time for the past 3 1/2 years, including cell phone payments, insurance payments, rent payments, etc.  We have saved 30,000 for a downpayment and are very interested in a house that the asking price is 200,000 and seems to be absolutely perfect.  

 

We are interested in a usda loan, and in the interest of time (8k tax credit, dream house, eliminating rent payments etc etc) we are tempted to send in the loan application to see if they will take a chance on us. According to the usda, there aren’t any minimum scores, but I do see a lot of things that point to 620 as being the magic number. 

 

Any advice?  Should we just wait 6 months and clean up our credit before applying?  Is there a downside to applying and being denied? Should we open up a credit card to try to rebuild?  Is one better than the other?

 

Thanks for anyone who might have some insight on these matters.