NCO Collection Agency - NCO Financial Systems paid to settle account, they failed to apply money my account and have no record of payment horsham, Pennsylvania

My mbna account first went to collections in 1997 with a balance of $1700. my account was sold to nco and acquire interest that bought my account to $3000. I settled for $1000 in Oct. 2008 when i decided to fix my credit to purchase a home. Recently, I enter the home buying process only to be derailed because this account is still on my credit report. I called in hopes to correct this error only to find out thatthe person I paid the money to is no longer employed there, they have no record of my payment and my account has is now in collections for $8000! I feel helpless because I have no way to prove that the account was paid  except for the testimony of myself and my fiance. I am an upstanding citizens, teacher and father of five who has to again put my dreams of homeownership on hold because of the fraudualent acts of this company and their employees!