You are not that far away from being able to qualify for a mortgage. Many lenders use 620 as the minimum min-score for an FHA mortgage. If you get approved for an FHA insured mortgage, you are automtically approved for the mortgage insurance.
You can even get a conventional mortgage at that score, but the reality is that conventional mortgage interest rates are score sensitive. (lower your score, the higher the interest rate). The more difficult approval for conventional mortgages is getting approved for PMI (private mortgage insurance). It is not only score sensitive but LTV (loan to value) sensitive. In other words, the more money you put down, the better PMI rate you will get. Naturally at 20% or more there is no PMI so that would be ideal.
Go to the Rebuilding Your Credit forum here to see what you can do to get rid of the derogatories on your report. Look for examples of Good will letters, Pay for Delete and settlements.
You need to do something to get rid of those derogs because FHA will only allow $2000 in collections and you have more than that. Over $2000 then the underwriter has to allow you a payment amount and it will hurt your ability to get a mortgage. Read this thread it is very helpful: http://ficoforums.myfico.com/t5/Mortgage-Loans/FHA-changing-collection-account-judgments-amp-dispute...
Also, getting three credit cards is ideal. Settle/pfd/gw your derogs first then go for another two cards (assuming you already have applied for that secured card).
You don't need large lines. You only need to keep your utilization in check (low) and pay on time, every time. You can not have any late payments within 12 months - including your rent, before you make application for a mortgage.
) but collections are marked from the DOFD which in virtually all cases will be before the Charge Off date. Basically it's when you first went 1+ day late on your account, or the month before the first 30+ days was listed on your report. That really shouldn't be hard to get off your report around the same time if not earlier.
