When a creditor says that their report will have a "negative effect" on your scores, it simply means it will drop a bit. That doesn't necessarily mean you will have no credit (or even bad credit).
Keep this in mind. If this is reported on your credit report it will not go away, even if you pay it off. Once paid all they are required to do is show that the debt is paid, but it will still be a negative item on your report. So you want to try and keep it off if possible.
Try contacting the creditor and explain your situation. Tell them that you will pay, and give them a payment schedule. Tell them that if they agree with your plan, they must agree to not report this on your report. If they refuse, demand that once paid they must contact the credit agency and have the item deleted. Yes, they can legally do that!
If they still refuse, I have told my clients to not pay the debt. Why would you do that and still suffer with a bad credit score? The item will be dropped after a few years anyway.
Remember, if they agree with your plan, GET IT IN WRITING!