If you've already tried debt validation with the collection agency, and they've confirmed it, and you're still within the statute of limitations for the debt, then you may want to try settling. This means you concede that you owe the money and are willing to pay the agency at least a portion of it as long as they'll agree to write off the entire amount. It's haggling, basically, and if you're really lucky and the right conditions are present, you can get a "pay for delete:" an offer to pay off (usually) the entire debt in exchange for having the entire negative account erased from your credit report, but don't count on that.

The actual negotiation is up to you, but keep in mind that you will need to keep the upper hand: don't let them know you are anxious, or that you need to repair your credit; instead, make them think you are about to declare bankruptcy, or that the statue of limitations is about to run out, and so on. Their goal is make maximize their profit off you, and if you scare them that they aren't going to get anything, they may bend to your will easier.

1. Know that the collection agencies bought your debt for pennies on the dollar.
When the original creditor wrote off your debt and sold it to the collection agency, the agency probably only paid 7 cents or less per dollar for it. Keep this in mind when making offers, as anything above that means that the agency will be making a profit.

2. Do EVERYTHING in writing and send EVERYTHING via registered mail.
You will need to be able to prove the entire thread of correspondence. The agency will tend to have a bad memory about what it said. This way you can prove everything that happened. The phone isn't as conducive to keeping track of your conversations, and they may be able to emotionally affect you on the phone with more ease than through letters. You should have already gotten them to stop calling you anyway.

3. Be aware that extra "fees" and "interest" added by the collection agency are lies.
Keep in mind that they agency's goal is to squeeze as much dough from you as possible, so when they tell you there are such-and-such late fees and so-and-so interest, don't believe them. Just ignore such fees and try to negotiate based on the original debt.

4. Try to get the entire account deleted from your credit report.
Ultimately, the best possible outcome is to offer a payment in exchange for having the entire account deleted from your credit report, known as "pay for delete" or PFD. This isn't very common. A lot of agencies will want to list it as "Paid Charge Off" or something similar, which will still hurt your score (but not as much). Any collections item at all is bad, so if time is on your side and you can do it, try to get them to agree to get rid of the account ALTOGETHER from your report. It would be as though it never existed. This will of course depend on your negotiating skills, the agency, and how desperate they are.

5. Never use a personal check
The last thing you want is for the collections agency to figure out your bank account info, as it will make it easier for them to get a court judgement against you. Always get a money order or cashier's check from a bank other than your own, and ALWAYS make copies of EVERYTHING. If you paid and the collections agency said you didn't, this will be your only way of proving it.

6. Be aware that the agency CAN still try to collect on the rest of the debt.
In some states it is absolutely illegal for a collections agency to accept a payment settlement, and then try to sue you for the remainder. And in other states, the ONLY way the agency can come after you for the remainder is to SPECIFICALLY write "under protest or without prejudice" on the check when they endorse it. The following list shows the states where it is illegal for the collector to come after you; the states in bolded italics are the ones where they still can come after you if they write the above note on the check.

Alabama

Arkansas

Colorado

Connecticut

Delaware

Georgia

Kansas

Louisiana

Maine

Massachusetts

Michigan

Minnesota

Missouri

Nebraska

New Hampshire

New Jersey

New York

North Carolina

Ohio

Oregon

Pennsylvania

Rhode Island

South Carolina

South Dakota

Texas

Utah

Vermont

Virginia

Washington

West Virginia

Wisconsin

Wyoming

This can be tricky, and it may help you to invest in a credit repair company that can write the letters for you and keep track of everything. A lot of these companies are scams but a few are legit, such as this one.