Pay off collections or settle with ally?

[907grown]

I leased a car from GMAC in 2006, won't do that again; either way, in 2010 I returned the car and was given no information as far as monies owed. A few months later a CO from GMAC showed up on my credit report, the balance was zero. I disputed it and it came back the same, balance still zero. Tried to contact GMAC, was put on eternal hold for the collections department, got frustrated hung up and went on with life. Disputed it again, and when it came back, it came back as ALLY with a 3300 balance!!! Disputed it a couple of times and it has always come back the same. When I contacted ALLY, the guy told me it had been written off as a bad debt and if I wanted to settle it that was an option. I offered the PFD at that time and he said no way, it would show up as settled. He was so nonchalant about the whole thing, told me to think about it and he would send me the breakdown and information discussing my options.
So here we are today, I have five or six collections that total 1495, I want to buy a house, probably USDA loan, I have seen some recent info about not having to have all baddies gone for USDA, my scores are not good, EQ 564, TU 610, and not paying another 20 bucks to find out EX, but that's where all of my collections are sitting. I have one with TU, 3 are showing on EQ and they're all showing on EX.
I am in a lease til August 2014, so I am not rushing out to get a mortgage, but I want to deal with this head on now so that next summer I will be in a position to walk in and walk out approved.
So my question is should I use the 1495 to pay off the collections or to settle with ALLY?

[Hevj1119]

I don't have a lot of experience, I can only share my own.

Hubs and I are in the process of buying a home, we're going USDA.  I had a 7 year old charge off on my credit that was scheduled to age off in September.  Not one, not  two but three different mortgage brokers told me I HAD to take care of that charge off before I could get approved for any loan, USDA or otherwise.  It was for $4500.  It was so old that they actually sent me a 1099-C and "forgave" the debt but left it on my credit report.  Desperate for the mortgage approval, I went ahead and settled it for 30%. 

I also had a number of "baddies" that I took care of as and when I had the money but they were not as much of a priority as the car loan.  My priorities were:  car loan, make sure I had a couple good tradelines, and then the little collections.  After a year of rebuilding, I got USDA approval with a decent score and two still outstanding baddies - a nearly 6 year old electric collection, and an unpaid  $118 collection for who knows what.  My lender hasn't said a word about the unpaid collection.