Hard to give specific advice, as a lot depends on your credit plans within the next year, and your reliance on ultimate CR exclusion to prevent others from becoming aware of the bad debt.
Apparently you plan to app for new credit soon, and thus the desire for earlier deletion of the CO.
My advice, above all, and regardless of any FICO or credit report exclusion issues, is to pay the debt.
It is so small as to almost be trivial, and its potential future impact, even after credit report exclusion, might be substantial
Credit report exclusion does not delete the debt, so until satisfied, you will always have unpaid, delinquent debt, which can become a show-stopper in any future quest for credit. Potential creditors could become aware of its presence by means other than a simple pull of your CR, so CR exclusion does not ensure that others will never become aware of it. In my opinion, it's not worth the chance of reliance only on CR exclusion as preventing others from becoming aware of the bad debt.
Since the OC is still reporting a balance, I will assume they still own the debt, and thus could still take payment.
If earlier CR deletion is a requirement, then offer them payment in exchange for deletion of the negative account history. I presume that monthly delinquencies were also reported in addition to the CO, so I would request deletion of all negative reporting. That is the best of all outcomes, as the account would then show as positive, and its age would be retained in your average age of accounts calculation.
My suspicion is that they wont jump on a PFD offer, as the amount is low, and they will have a bunch of re-accounting to do upon accepting payment, such as moving the prior debt back into their receivable/received assets column, and removing their prior writeoff of the bad debt, thus requiring an update in their next tax filing. Most likely more time and expense on their part to accept payment than the small amount they will receive. But give it a go.
If they dont accept a PFD, I would still pay in full.
