First, Don't do anything with your credit until you speak with some type of advisor. A lot of people think paying off old debts that have gone bad will improve their credit, when really it has the oposite effect, at least in the short term.I have a great lender you can speak with. He will give you FREE credit counseling, so you can really improve your credit score. Contact me if you'd like that info.
Second, depending on "how bad is bad," you may be able to rent while you are cleaning your credit. There are plenty of homes on the MLS right now in your area that have been listed for a long time. The owners may be happy to do a lease/option or lease/purchase, or simply rent for a year.
Most people have credit issues at some point. It's really not hard to turn it around!