What steps should I take?

Twenty nine months ago I bought 2 phones in a store and signed up for a 2 year contract agreement with the carrier of these phones, which has a guarantee in writing that the consumer may return the phones within 30 days and break the contract with the carrier if not completely satisfied and owe nothing, including the $200 early termination fee. I returned them to the store of purchase within 6 days and was given a refund of the purchase price, and had the services cancelled in my presence by the store's associate. Few days ago, I checked my credit report, and found that there derogatory info from a collection agency, stating that I was owing over $1000 for services from the original creditor (phone carrier). I called the agency and they told me to call the carrier which i did. They claimed that because the account was cancelled by them a year ago, they do not have detailed info on the bills but told me what was the monthly usage for each month and I thought it nwas impossible, unless the store rep did not really cancell the account but it was all a hoax. To make matters worst neither the carrier or the angency has my full address but partial which means, I never got a bill from them. I could'nt have, because the account was cancelled over two years ago. So they said if I could show them the receipt of the returned phones, they would investigate the situation. I did not have the original receipt, but went back to the store of purchase and they gave me a print out of the return I did over two years. Can someone please tell me what should I do and How can I get this collection off of my credit? I do not want to take the word of the original creditor. I need knowledge on how to solve this problem because, icheck my credit every six months and since this went on my credit, my score fell tremendously, it messed up my plans for a low interest loan for the future of me and my kids.