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Trying to reach my goal - what would give me best chance?

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Trying to reach my goal - what would give me best chance?

I have been through a tough stretch but things are getting better slowly and I'm looking into purchasing another home but I need some advice.

Here is my situation:

Current middle credit score is about 540. Goal by next December 700!

Last late payment December 2011 - 30 days late.

perfect on time payment since.

High credit utilization 99%

1 collection account 8 K USAA credit card.

income around 73K (DH is 85 so combined 158K)

I own a condo never late on mortgage.


I want to get rid of the collection account and pay down all my credit cards to 1 to 9% but wondering about the order that I should do things. I have $6K in cash right now and Intiially I was thinking to try to settle the colection account hopefully for 50% but then I realized that if I took that money now and paid down the current open credit cards that I could reduce my monthly payments by at least $200 and I would see an immediate jump in my score. I am hoping to buy by December 2013 and I wont have another lump sum to settle the collection account till at least July 2013 when I get my disbursement so what should I do?  If I settle now I'll have 12 months since settle ment by the time I apply for the mortgage...if I wait then only 6 months till I apply but on the other hand if I tackle my debt now immediate jump in scores and lessenign my monthly expense for the next 6 months. what shoudl I do? Everything else is pretty much in line same employer for the last 6 years, good mortgage payment history, like I said a couple lates on credit card debt last one 1 year ago but will be 2 years by the time I apply.  I've had a rough patch due to complications during pregnancy and childbirth which left me taking LWOP.

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