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Unfortunately, if this gets entered on your credit report, then it will cause a bit of damage. That's not to say that your credit will be devastated, but if you intend to get a loan in the near future, then it could cause your interest rate to be higher, and some lenders may even refuse to give you credit. In addition, you could be sued for the $4950, plus attorneys fees, etc. If that happens, and the creditor gets a judgment against you, then it could take collection action against you such as a wage garnishment, bank garnishment, or property lien. Accordingly, if I were in your shoes, I would attempt to settle.
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