FORM 10-Q
                      SECURITIES AND EXCHANGE COMMISSION
                           WASHINGTON, D.C.  20549

(Mark One)
( X )     QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
          EXCHANGE ACT OF 1934

          For the quarterly period ended:  September 30, 2001
                                      OR
(   )     Transition Report Pursuant to Section 13 or 15(d) of the
          Securities Exchange Act of 1934

          For the transition period from :                 to

Commission file number:  1-8133

                           XEROX CREDIT CORPORATION
            (Exact name of Registrant as specified in its charter)
Delaware                                                         06-1024525
(State or other jurisdiction of                             (I.R.S. Employer
incorporation or organization)                           Identification No.)

100 First Stamford Place, Stamford, Connecticut                       06904
(Address of principal executive offices)                          (Zip Code)

                                (203) 325-6600
             (Registrant's telephone number, including area code)

      Securities registered pursuant to Section 12(b) of the Act:

Title of Each Class                Name of Each Exchange on Which Registered

7.20% Notes due 2012                  New York Stock Exchange


      Securities registered pursuant to Section 12(g) of the Act:  None

Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.     Yes:      No:  X

Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the close of the latest practicable date.

   Class                                  Outstanding as of October 31, 2001
Common Stock                                               2,000



                      THIS DOCUMENT CONSISTS OF 20 PAGES



Forward-Looking Statements

From time to time Xerox Credit Corporation ("Registrant" or the "Company") and
its representatives may provide information, whether orally or in writing,
including certain statements in this Quarterly Report on Form 10-Q, which are
deemed to be "forward-looking" within the meaning of the Private Securities
Litigation Reform Act of 1995 ("Litigation Reform Act"). These forward-looking
statements and other information relating to Registrant are based on the
beliefs of management as well as assumptions made by and information currently
available to management.

The words "anticipate," "believe," "estimate," "expect," "intend," will and
similar expressions, as they relate to  Registrant or Registrant's management,
are intended to identify forward-looking statements.  Such statements reflect
the current views of Registrant with respect to future events and are subject
to certain risks, uncertainties and assumptions.  Should one or more of these
risks or uncertainties materialize, or should underlying assumptions prove
incorrect, actual results may vary materially from those described herein as
anticipated, believed, estimated or expected.  Registrant does not intend to
update these forward-looking statements.

In accordance with the provisions of the Litigation Reform Act, we are making
investors aware that such forward-looking statements, because they relate to
future events, are by their very nature subject to many important factors
which could cause actual results to differ materially from those contained in
the forward-looking statements.  Such factors include, but are not limited to,
the liquidity of Registrant.

Registrant's liquidity is dependant upon the liquidity of its parent, Xerox
Corporation ("XC", and collectively with its subsidiaries, "Xerox").
Accordingly, certain disclosures contained herein relate to events and
transactions that affect the liquidity of Xerox, even if they do not directly
affect the liquidity of the Registrant.

In October 2000, Xerox announced a turnaround program which includes a wide-
ranging plan to generate cash, return to profitability and pay down debt. The
success of the turnaround program is dependent upon successful and timely
sales of assets, restructuring the cost base, placement of greater operational
focus on the core business and the transfer of the financing of customer
equipment purchases to third parties.  Cost-base restructuring is dependent
upon effectively and timely reducing the number of employees, closing and
consolidating facilities, outsourcing certain manufacturing and logistics
operations, reducing operational expenses and successfully implementing
process and systems changes.

Xerox's liquidity is currently provided through its own cash generation from
operations and various financing strategies including securitizations. Xerox
is currently funding its customer financing activity from available sources of
liquidity, including cash on hand.  There is no assurance that Xerox will be
able to continue to fund its customer financing activity at present levels.
Xerox is actively seeking third parties to provide financing to its customers
and recently announced a "framework agreement" under which GE Capital's Vendor
Financial Services group will become the primary equipment financing provider
for Xerox customers in the United States.  This Agreement has not yet been
completed and remains subject to the negotiation of definitive agreements and
satisfaction of closing conditions, including completion of due diligence.
Xerox's ability to continue to offer customer financing and be successful in
the placement of its equipment with customers is largely dependent upon
obtaining such third party financing.

Implementation of the framework agreement is expected to significantly reduce
or eliminate the creation of new contracts receivable for Xerox.  In
anticipation of these agreements, Registrant stopped purchasing new contracts
receivable from XC effective July 1, 2001 and the existing portfolio will
ultimately run-off.  Xerox's discussions to consider selling portions of the
existing finance receivables portfolio, and its initiatives to actively pursue
alternative forms of financing, including securitizations and secured
borrowings, could further reduce the portfolio owned by Registrant.
Registrant may, at some point in the future, resume purchasing contracts
receivable from XC, but expects that it would be at a significantly lower
level than in the past.  Xerox has also embarked upon a process of selling
certain assets with the objective of generating proceeds for the purpose of
retiring outstanding debt.  Xerox does not expect to be able to access the
capital markets in registered public offerings pending resolution of the
review of Xerox's accounting practices by the Securities and Exchange
Commission.  Xerox cannot predict when the Securities and Exchange Commission
will conclude either its investigation or its review or the outcome or impact
of either.

Xerox's liquidity is dependent on the timely implementation and execution of
the various turnaround program initiatives as well as its ability to generate
positive cash flow from operations, possible asset sales, and various
financing strategies including securitizations and its ability to successfully
refinance a portion of its $7 billion Revolving Credit Agreement and extend
its maturity beyond October, 2002.  Should Xerox not be able to successfully
complete the turnaround program, generate cash and refinance and extend the
maturity of the Revolving Credit Agreement on a timely or satisfactory basis,
Xerox will need to obtain additional sources of funds through other operating
improvements, financing from third parties, asset sales, or a combination
thereof.  There can be no assurance that Xerox can obtain these additional
sources of funds.  Xerox has initiated discussions with the agent banks under
its $7 billion revolving credit agreement in order to refinance a portion and
extend its maturity beyond October, 2002.  This agreement contains a
consolidated tangible net worth ("CTNW") covenant and at September 30, 2001
Xerox had a $182 million cushion over the minimum amount required under the
covenant.  Operating losses, restructuring costs and adverse currency
translation adjustments would erode the cushion.  Failure to successfully
refinance and extend the maturity of the agreement or a breach of the CTNW
covenant could have a serious adverse impact on Xerox's liquidity.



                       XEROX CREDIT CORPORATION
                               Form 10-Q
                          September 30, 2001


Table of Contents
                                                                  Page
Part I -  Financial Information

   Item 1. Financial Statements

      Consolidated Statements of Income                              5

      Consolidated Balance Sheets                                    6

      Consolidated Statements of Cash Flows                          7

      Notes to Consolidated Financial Statements                     8

   Item 2. Management's Discussion and Analysis of Results of
     Operations and Financial Condition

      Results of Operations                                         11

      Capital Resources and Liquidity                               12

   Item 3. Quantitative and Qualitative Disclosures About
     Market Risk                                                    16

Part II - Other Information

   Item 1. Legal Proceedings                                        17

   Item 2. Changes in Securities                                    17

   Item 3. Defaults Upon Senior Securities                          17

   Item 4. Submission of Matters to a Vote of Security Holders      17

   Item 5. Other Information                                        17

   Item 6. Exhibits and Reports on Form 8-K                         17

Signature                                                           18

Exhibits

   Computation of Ratio of Earnings to Fixed Charges (Xerox
   Credit Corporation)                                              19

   Computation of Ratio of Earnings to Fixed Charges (Xerox
   Corporation)                                                     20



PART I.   FINANCIAL INFORMATION
Item 1.   Financial Statements

                           XEROX CREDIT CORPORATION
                      CONSOLIDATED STATEMENTS OF INCOME
                                 (UNAUDITED)
                                (In Millions)

                                   Three Months Ended   Nine Months Ended
                                     September 30,         September 30,
                                     2001     2000         2001     2000



Earned income:
   Contracts receivable            $   91    $ 113       $  338   $  324
Expenses:
   Interest, net                       63       74          229      211
   Operating and administrative         3        3            9        9
   Derivative instruments fair value
   adjustments, net                    15        -           22        -
                                   -------------------------------------
      Total expenses                   81       77          260      220
                                   -------------------------------------
Income before income taxes             10       36           78      104

Provision for income taxes              4       14           30       41
                                   -------------------------------------
Income before cumulative effect         6       22           48       63
   of change in accounting
   principle

Cumulative effect of change in
   accounting principle                 -        -           (3)       -
                                   -------------------------------------
Net income                         $    6    $  22       $   45   $   63
                                   =====================================

See accompanying notes.



                            XEROX CREDIT CORPORATION
                          CONSOLIDATED BALANCE SHEETS
                                 (In Millions)

                                     ASSETS
                                                  September 30,   December 31,
                                                       2001           2000
                                                   (UNAUDITED)


Cash and cash equivalents                            $     -        $     -
                                                     ----------------------
Investments:
    Contracts receivable                               4,812          6,355
    Unearned income                                     (485)          (755)
    Allowance for losses                                (110)          (140)
                                                     ----------------------
        Total investments                              4,217          5,460
                                                     ----------------------
Due from Xerox Corporation, net                          568              -
Derivative and other assets                               35             34
                                                     ----------------------
        Total assets                                 $ 4,820        $ 5,494
                                                     ======================

                      LIABILITIES AND SHAREHOLDER'S EQUITY
Liabilities:
    Notes payable within one year:
      Commercial paper                               $     -        $    32
      Current portion of notes payable after one year    349            326
      Current portion of secured borrowing               143            134
      Notes Payable - Xerox and affiliates                 -            388
    Notes payable after one year                       3,449          3,665
    Secured borrowing due after one year                  41            191
    Due to Xerox Corporation, net                          -             98
    Accounts payable and accrued liabilities              40             24
    Derivative liabilities                               153              -
    Deferred income taxes                                  -             20
                                                     ----------------------
        Total liabilities                              4,175          4,878
                                                     ----------------------
Shareholder's Equity:
    Common stock, no par value, 2,000 shares
        authorized, issued, and outstanding               23             23
    Additional paid-in capital                           219            219
    Accumulated other comprehensive income               (16)             -
    Retained earnings                                    419            374
                                                     ----------------------
        Total shareholder's equity                       645            616
                                                     ----------------------
        Total liabilities and shareholder's equity   $ 4,820        $ 5,494
                                                     ======================



See accompanying notes.



                               XEROX CREDIT CORPORATION
                        CONSOLIDATED STATEMENTS OF CASH FLOWS
                                   (UNAUDITED)
                                  (In Millions)

                                                            Nine Months Ended
                                                              September 30,
                                                             2001       2000
Cash Flows from Operating Activities
  Net income                                               $   45     $   63
  Adjustments to reconcile net income to net cash
    provided by operating activities:
    Net change in operating assets and liabilities            (25)        29
    Loss on derivative instruments, net of tax                 16          -
                                                           -----------------
Net cash provided by operating activities                      36         92
                                                           -----------------
Cash Flows from Investing Activities
  Purchases of investments                                   (908)    (1,764)
  Proceeds from investments                                 2,145      1,343
  Proceeds from sale of other assets                           28          -
                                                           -----------------
Net cash provided by (used in) investing activities         1,265       (421)
                                                           -----------------
Cash Flows from Financing Activities
  Change in commercial paper, net                             (32)       730
  Change in notes with Xerox and affiliates, net           (1,042)      (721)
  Proceeds from long-term debt                                  -      1,936
  Principal payments on long-term debt                       (227)    (1,616)
                                                           -----------------
Net cash (used in) provided by financing activities        (1,301)       329
                                                           -----------------

  Increase in cash and cash equivalents                         -          -

  Cash and cash equivalents, beginning of period                -          -
                                                           -----------------
  Cash and cash equivalents, end of period                 $    -     $    -
                                                           =================



See accompanying notes.



                          XEROX CREDIT CORPORATION
                  Notes to Consolidated Financial Statements

(1)  The unaudited consolidated interim financial statements presented herein
have been prepared by Xerox Credit Corporation (the "Company") in
accordance with the accounting policies described in its Annual Report on Form
10-K for the fiscal year ended December 31, 2000 and should be read in
conjunction with the Notes to Consolidated Financial Statements which appear
in that report.

In the opinion of management, all adjustments (including normal recurring
adjustments) which are necessary for a fair statement of the operating results
for the interim periods presented have been made.

(2)  The terms of a Support Agreement with Xerox Corporation ("XC") provide
that the Company will receive income maintenance payments from XC, to the
extent necessary, so that the Company's earnings shall not be less than 1.25
times its fixed charges.  For purposes of this calculation, both earnings and
fixed charges are as defined in Section 1404 (formerly Section 81(2)) of the
New York Insurance Law as it existed prior to January 1, 1993.  In addition,
the agreement requires that XC retain 100 percent ownership of the Company's
voting capital stock.

(3)  In 2000, the Company transferred $457 million of contract receivables
to a wholly-owned qualifying bankruptcy-remote special purpose entity for cash
proceeds of $411 million and a retained interest of $46 million. The
outstanding balance on this amortizing facility was $184 million at September
30, 2001. Since this transaction was accounted for as a secured borrowing, the
balance sheet continues to reflect the receivables and related debt
obligation.

(4)  We adopted Statement of Financial Accounting Standards No. 133,
"Accounting for Derivative Instruments and Hedging Activities," (SFAS No. 133)
as of January 1, 2001.  SFAS No. 133 requires companies to recognize all
derivatives as assets or liabilities measured at their fair value.  Gains or
losses resulting from changes in the fair value of derivatives would be
recorded each period in current earnings or other comprehensive income,
depending on whether a derivative is designated as part of a hedge transaction
and, if it is, depending on the type of hedge transaction.

With the adoption of SFAS No. 133, we recorded a net cumulative after-tax
charge of $3 million in our Consolidated Statements of Income and a net
cumulative after-tax loss of $20 million in Accumulated Other Comprehensive
Income. Further, as a result of recognizing all derivatives at fair value,
including the differences between the carrying values and fair values of
related hedged assets, liabilities and firm commitments, we recognized a $10
million increase in Total Assets and a $33 million increase in Total
Liabilities.  Approximately $5 million of the after-tax loss of $20 million
recorded in Accumulated Other Comprehensive Income at transition has been
reclassified to year to date earnings.

The adoption of SFAS No. 133 will increase the future volatility of
reported earnings and other comprehensive income. In general, the amount of
volatility will vary with the level of derivative and hedging activities and
the market volatility during any period. However, as more fully described in
management's discussion of capital resources and liquidity, our ability to
enter into new derivative contracts is severely constrained.  The following is
a summary of our SFAS No. 133 activity during the first nine months of 2001:


                           XEROX CREDIT CORPORATION
                  Notes to Consolidated Financial Statements

Interest Rate/Cross Currency Swaps.  Our ability to enter into new foreign-
currency and interest rate derivative agreements with third parties is
severely constrained due to our present debt ratings (as more fully discussed
under "Capital Resources and Liquidity").  When we are able to efficiently
access the swap markets, we enter into several types of derivative
agreements primarily to manage interest rate and currency exposures related to
our indebtedness and to "match fund" our customer financing assets. We attempt
to manage our exposures in total on an economic basis, considering our total
portfolio of indebtedness, which includes fixed rate, variable rate and
foreign currency borrowings with varying terms. Accordingly, while all of our
derivative instruments are intended to economically hedge currency and
interest rate risk, differences between the contract terms of our derivatives
and the underlying related debt result in our inability to obtain hedge
accounting treatment in accordance with SFAS No. 133.  This results in
mark-to-market valuation of these derivatives directly through earnings, which
leads to increased volatility in our earnings.

The net loss from the mark-to-market valuation of our interest rate
derivatives recorded in earnings was approximately $11 million and $45
million for the quarter and nine months ended September 30, 2001,
respectively.  The year to date loss is primarily related to the valuation of
our match funding swaps in which we pay fixed and receive variable interest.
The loss reflects the decrease in variable rates during the first nine months
of 2001. The net gain/(loss) from the mark-to-market valuation of certain
cross currency interest rate swap agreements was $(4) million and $23 million
for the quarter and nine months ended September 30, 2001, respectively.  The
amounts are net of the remeasurement of the underlying foreign currency debt.
These cross currency interest rate swaps hedge approximately 180 billion of
Yen borrowings. 65 billion Yen is hedged through a third party swap and the
remainder is hedged through an intercompany swap with XC. These borrowings
have an underlying Yen fixed interest rate, which the swaps convert to a US
dollar variable rate. The gain for the first nine months of 2001 reflects the
decline in variable rates partially offset by related changes in exchange
rates.

As of May 2001, we designated the third-party cross-currency interest rate
swap associated with 65 billion in Yen borrowings as a fair value hedge and
accounted for it accordingly on a prospective basis.  The net ineffective
portion of this fair value hedge, recorded in earnings during the third
quarter, was immaterial.

(5)  In July 2001, XC completed the offering of $513 million of floating rate
asset backed notes and received cash proceeds of $480 million net of $3
million paid in expenses and fees.  As part of the transaction, we sold back
to XC approximately $639 million of contracts receivable.  The transaction was
accounted for as a sale of contract receivables at approximately book value.

(6) In September 2001, XC and GE Capital announced a framework agreement
under which GE Capital's Vendor Financial Services group will become the
primary equipment financing provider for XC customers in the United States.
The two companies also agreed to the principal terms of a financing
arrangement under which XC will receive from GE Capital approximately $1
billion secured by portions of XC's finance receivables in the United
States.  As part of this financing arrangement, we will sell a portion of our
contract receivables back to XC.  In anticipation of these agreements, in July
2001 we stopped purchasing contracts receivable from XC.  As a result, the
remaining portfolio of receivables will decrease as accounts are collected or
sold.  We may, at some point in the future, resume purchases of contracts
receivable from XC, but expect that it would be at a significantly lower level
than in the past.  Historically, it has been our intent to maintain a target
debt-to-equity leverage ratio of 8 to 1.  However, due to our cessation of
receivables purchases from XC and our decision to run-off or sell the existing

                           XEROX CREDIT CORPORATION
                  Notes to Consolidated Financial Statements

portfolio, we will no longer maintain a specific debt-to-equity leverage
ratio.  We will loan to XC on a demand basis all proceeds from the sale or
collection of our receivables.  As of September 30, 2001, demand loans to XC
totaled $568 million.  These loans bear interest at LIBOR plus 2 percent.  We
will collect these loan amounts from XC to the extent necessary to repay our
maturing debt obligations, fund our operations, or for such other purposes
that we determine to be appropriate.



Item 2.  Management's Discussion and Analysis of Results of Operations and
Financial Condition

RESULTS OF OPERATIONS
The sole business of our Company was to purchase long-term contracts
receivable arising from installment sales and sales-type leases originated by
the domestic marketing operations of XC.  Substantially all commercial,
federal government and taxable state and local government transactions
originated by XC were sold to us.  However, as a result of the agreements
between Xerox and GE Capital (see note 6) we will no longer be purchasing
receivables from XC, and our remaining portfolio of contracts receivable will
decrease accordingly as accounts are collected or sold.

Contracts receivable income represents income earned under an agreement with
XC pursuant to which we undertook the purchases noted above.  The receivables
arose primarily from XC equipment being sold under installment sales and
sales-type leases, including any residual income related to such leases.

Total earned income was $91 million and $113 million for the third quarter
of 2001 and 2000, respectively.  The decrease reflects the reduction of the
debt from the sale and run-off of our portfolio as a result of our decision to
discontinue purchasing receivables from XC in July 2001.  Year to date earned
income was $338 million and $324 million for the first nine months of 2001 and
2000, respectively, resulting from higher yields in the first nine months of
2001 compared to the first nine months of 2000.

Interest expense was $63 million and $74 million for the third quarter of
2001 and 2000, respectively.  The decrease reflects a reduced portfolio
size as a result of the decision to discontinue purchasing receivables from XC
in July 2001.  Year to date interest expense increased to $229 million for the
first nine months of 2001 from $211 million for the first nine months of 2000
as a result of an increase in our cost of debt.

Prior to the fourth quarter of 2000, Xerox and we had employed a match funding
policy for financing assets and related liabilities.  Under this policy, with
respect to us, the interest and currency characteristics of our indebtedness
were, in most cases, matched to the interest and currency characteristics of
our contract receivables, and short-term debt was classified in our balance
sheets as long-term if we had the intent and ability to extend the maturities
of that debt accordingly. The recent downgrades of XC's and our debt
significantly changed the nature of our indebtedness and substantially reduced
our ability to refinance our debt or to continue our historical match funding
policy.  We now expect to pay down our outstanding obligations as they
contractually mature, and our debt has been classified in the consolidated
balance sheets accordingly.

Operating and administrative expenses were $3 million for both the third
quarter of 2001 and 2000 and $9 million for both the first nine months of
2001 and 2000. These expenses are incurred to administer the contracts
receivable purchased from XC.

The effective income tax rate for the third quarter and first nine months of
2001 was 38.9%, unchanged from the third quarter of 2000.

In the first quarter 2001, we adopted Statement of Financial Accounting
Standards (SFAS) No. 133, "Accounting for Derivative Instruments and Hedging
Activities." SFAS No. 133 requires companies to recognize all derivatives as
assets or liabilities measured at their fair value. Gains or losses resulting
from changes in the fair value of derivatives are recorded each period in
current earnings or other comprehensive income, depending on whether a
derivative is designated as part of a hedge transaction and, if it is,
depending on the type of hedge transaction.  Prior to the debt rating
downgrades which have severely constrained our ability to access the
derivatives market (see: Capital Resources and Liquidity), we typically have
entered into several types of derivative agreements primarily to manage
interest rate and currency exposures related to our indebtedness and to "match
fund" our customer financing assets. We attempt to manage our exposures in
total on an economic basis, considering our total portfolio of indebtedness,
which includes fixed rate, variable rate and foreign currency borrowings with
varying terms. Accordingly, while all of our derivative instruments are
intended to economically hedge currency and interest rate risk, differences
between the contract terms of our derivatives and the underlying related debt
result in our inability to obtain hedge accounting treatment in accordance
with SFAS No. 133. This results in mark-to-market valuation of these
derivatives directly through earnings, which increases volatility in our
earnings.

The net loss from the mark-to-market valuation of our interest rate
derivatives recorded in earnings was approximately $11 million and $45
million for the quarter and nine months ended September 30, 2001,
respectively.  The year to date loss is primarily related to the valuation of
our match funding swaps in which we pay fixed and receive variable interest.
The loss reflects the decrease in variable rates during the first nine months
of 2001. The net gain/(loss) from the mark-to-market valuation of certain
cross currency interest rate swap agreements was $(4) and $23 million for the
quarter and nine months ended September 30, 2001, respectively.  The amounts
are net of the remeasurement of the underlying foreign currency debt. These
cross currency interest rate swaps hedge approximately 180 billion of Yen
borrowings. 65 billion Yen is hedged through a third party swap and the
remainder is hedged through an intercompany swap with XC. These borrowings
have an underlying Yen fixed interest rate, which the swaps convert to a US
dollar variable based rate. The gain for the first nine months of 2001
reflects the decline in variable rates partially offset by related changes in
exchange rates.

CAPITAL RESOURCES AND LIQUIDITY

Our cash and liquidity resources are managed by XC as part of its U.S. cash
management system. Accordingly, we generally do not maintain cash balances,
and cash collected is generally used to reduce debt, including intercompany
debt.  Historically, our principal sources of funds have been cash from the
collection of XC contracts receivable, borrowings and cost-efficient use of
asset securitizations. As discussed below, during 2000 we also drew down funds
available under a $7.0 billion Revolving Credit Agreement (the "Revolver")
dated as of October 22, 1997 among XC, us, certain other affiliated borrowers,
and a group of banks.

Net cash provided by operating activities was $36 million in the first nine
months of 2001 compared to $92 million during the same period in 2000.

Net cash provided by investing activities was $1,265 million in the first nine
months of 2001 compared to $421 million used by investing activities during
the same period in 2000. The change from 2000 to 2001 primarily reflects lower
levels of equipment sales by XC and an increase in principal collections plus
the proceeds from the sale of an asset associated with previously discontinued
operations.

The changes in operating and investing cash flows resulted in net cash used by
financing activities of $1,301 million during the first nine months of 2001,
versus $329 million provided by financing activities during the same period in
2000. During the first nine months of 2001, commercial paper balances
declined $32 million, reducing our commercial paper outstanding to zero.
Principal payments on long term debt used an additional $227 million while the
net change in notes with XC and affiliates used an additional $1,042 million.

During 2001 and 2000, the agencies that assign ratings to our debt and XC's
debt downgraded these issuers' senior and short-term debt several times.  As
of October 31, 2001, debt ratings by Moody's are Ba1 and Not Prime,
respectively, and the ratings outlook is negative; debt ratings by Fitch are
BB and B, respectively, and the ratings outlook is stable; and debt ratings by
Standard and Poors ("S&P") are BB and B, respectively, and the ratings outlook
is stable. Since October 2000, uncommitted bank lines of credit and the
unsecured capital markets have been, and are expected to continue to be,
largely unavailable to XC and its affiliates, including us.  In addition, we
expect this to result in higher borrowing costs going forward.  This may also
result in XC having to increase its level of intercompany lending to
affiliates.

As a result of the debt downgrades described above, in the fourth quarter
2000, XC and its eligible subsidiaries drew down the entire $7.0 billion
available to us under our Revolving Credit Agreement (the "Revolver"),
primarily to maintain financial flexibility and pay down debt obligations as
they came due. Our outstanding balance under this line of credit was $1.0
billion at September 30, 2001. XC and its consolidated subsidiaries
(collectively, "Xerox"), including us, are in compliance with the covenants,
terms and conditions in the Revolver, which matures on October 22, 2002. The
only financial covenant in the Revolver requires Xerox to maintain a minimum
of $3.2 billion of Consolidated Tangible Net Worth, as defined ("CTNW").

At September 30, 2001, Xerox's CTNW was $182 million in excess of the minimum
requirement, a decrease of approximately $330 million from the December 31,
2000 level. The decrease is due to operating and restructuring losses and
unfavorable foreign currency translation during that period of time, offset
partially by the favorable impacts of gains on asset sales and debt-for-equity
exchanges described below . Further operating losses, restructuring costs and
adverse currency translation adjustments would erode this excess, while
operating income, gains on asset sales, favorable currency translation, and
exchanges of debt for equity would increase this excess.  Xerox expects to be
in continued compliance with the covenant.

Xerox has recently initiated discussions with its agent banks to refinance a
portion of the Revolver, including our borrowings thereunder, and extend the
Revolver's maturity beyond October 2002.  Failure to successfully refinance
and extend the maturity of the Revolver or a breach of the CTNW covenant could
have a serious adverse effect on Xerox's liquidity.

In the first nine months of 2001, XC retired $340 million of long-term debt
through the exchange of 37.4 million shares of XC common stock which increased
CTNW by approximately $319 million. Since September 30, 2001 XC has retired an
additional $35 million of debt through the exchange of 3.8 million
additional shares, which increased Xerox's CTNW by an estimated $32 million.
Additional exchanges of debt for equity would increase Xerox's CTNW and
improve Xerox's CTNW cushion.

As of September 30, 2001, we had approximately $0.3 billion of debt maturing
during the remainder of 2001, and $1.8 billion maturing in 2002, as summarized
below ($ billions):

                                           2001        2002
            First Quarter                              $0.1
            Second Quarter                              0.0
            Third Quarter                               0.0
            Fourth Quarter                 $0.3         1.7*
                                           ----------------
            Full Year                      $0.3        $1.8
                                           ================
* Includes $1.0 billion maturing under the Revolver

As of September 30, 2001, Xerox had approximately $1.3 billion
of consolidated debt expected to be repaid during the remainder of 2001.

Neither XC nor we have any other material obligations scheduled to mature
in 2001 unless our senior debt rating is further downgraded by Moody's, or the
counterparties to certain currently outstanding securitization and derivative
contracts choose to exercise their rights to terminate those contracts, as
discussed below.

In 2000, Xerox announced a global Turnaround Program which includes
initiatives to sell certain assets, improve operations and liquidity, and
reduce annual costs by at least $1 billion. As of September 30, 2001 Xerox had
made significant progress toward these objectives, which Xerox believes
will positively affect its capital resources and liquidity position when
completed.

With respect to asset sale initiatives, in the fourth quarter of 2000, Xerox
sold its China operations to Fuji Xerox Co., Ltd. ("Fuji Xerox"), generating
$550 million of cash and transferring $118 million of debt to Fuji Xerox. In
March 2001, Xerox sold half of its interest in Fuji Xerox to Fuji Photo Film
Co., Ltd. for $1,283 million in cash. On October 2, 2001, Xerox announced an
agreement under which Flextronics, a Singapore company, will purchase certain
assets and assume certain liabilities related to Xerox's office-segment
manufacturing facilities in several locations around the world.  Xerox expects
to receive cash proceeds of approximately $220 million in phases over the next
year, including a significant portion in the fourth quarter 2001, as each of
the applicable locations is sold.  Under this agreement, Flextronics will
manufacture certain of Xerox's office-segment equipment and components for a
period of five years.

Xerox has initiated discussions to implement third-party vendor financing
programs which, when implemented, will significantly reduce Xerox's and our
debt and receivables levels going forward.  In addition, Xerox is in
discussions to consider selling portions of the existing finance receivables
portfolio, and is continuing to actively pursue alternative forms of financing
including securitizations and secured borrowings.  In connection with these
initiatives, in January 2001, Xerox received $435 million in financing from an
affiliate of GE Capital, secured by the portfolio of lease receivables in the
United Kingdom. In the second quarter of 2001, Xerox sold its leasing
businesses in four Nordic countries to Resonia Leasing AB for $352 million in
cash plus retained interests in certain finance receivables for total proceeds
of approximately $370 million. These sales are part of an agreement under
which Resonia will provide on-going, exclusive equipment financing to Xerox's
customers in those countries.

In July 2001, XC sold $513 million of asset-backed notes supported by domestic
finance receivables, for cash proceeds of $480 million.  As part of this
transaction, we sold back to XC certain of our contracts receivable and used
the proceeds to reduce notes payable to XC.

On September 11, 2001, Xerox announced a "Framework Agreement" with GE
Capital's Vendor Financial Services group, under which GE Capital will become
the primary equipment-financing provider for XC's U.S. customers.  Xerox also
announced an agreement under which it will receive a loan of approximately $1
billion from GE Capital, secured by certain of XC's finance receivables in the
United States.  We will sell back to XC certain of our contracts receivable as
part of this latter transaction.  We expect that both of these agreements with
GE Capital will be completed in the fourth quarter 2001.  The Framework
Agreement, when implemented, is expected to significantly reduce the amount of
new contracts receivable that will be available for XC to sell to us.  In
addition to the GE Capital loan, XC is also in discussions to consider selling
portions of its remaining finance receivables portfolio.  In that event, we
might sell back to XC additional contracts receivable owned by us. Effective
July 1, 2001, in anticipation of these agreements and their likely effects on
the size of our contracts receivable portfolio, we stopped purchasing
contracts receivable from XC.  As a result, our existing portfolio of
contracts receivable will ultimately runoff as existing accounts are sold or
collected.  We will loan to XC on a demand basis all proceeds from the sale or
collection of our receivables. As of September 30, 2001, demand loans to XC
totaled $568 million.  These loans bear interest at LIBOR plus 2 percent.  We
will collect these loan amounts from XC to the extent necessary to repay our
maturing debt obligations, fund our operations, or for such other purposes
that we determine to be appropriate. We may, at some point in the future,
resume purchases of contracts receivable from Xerox, but expect that it would
be at a significantly lower level than in the past.

On June 5, 2001, Xerox had announced its receipt of a commitment letter from
Bankers Trust Company, a subsidiary of Deutsche Bank, for a fully underwritten
secured revolving borrowing facility of $500 million.  As a result of the
commencement of discussions to refinance the Revolver, as well as the progress
Xerox has made to-date on the global initiatives discussed above, Xerox has
allowed the Bankers Trust loan commitment to expire unutilized.

Xerox believes its liquidity is presently sufficient to meet current and
anticipated needs going forward, subject to timely implementation and
execution of the various items discussed above.  Should Xerox not be able to
successfully complete these items on a timely or satisfactory basis, Xerox
will need to obtain additional sources of funds through other operating
improvements, financing from third parties, additional asset sales, or a
combination thereof.  The adequacy of Xerox's continuing liquidity depends on
its ability to successfully generate positive cash flow from an appropriate
combination of these sources.

Through October 2000, we entered into interest rate swap agreements that
effectively converted variable-rate debt into fixed-rate debt. These
agreements, to the extent they remain outstanding, mature at various dates
through 2005. Through October 2000, we also entered into interest rate swap
and interest rate cross-currency agreements that effectively converted fixed-
and variable-rate debt into debt indexed to LIBOR rates. These agreements, to
the extent they remain outstanding, mature at various dates through 2007.

On December 1, 2000, Moody's reduced its rating of Xerox's and our senior debt
to below investment grade, significantly constraining our ability to enter
into new foreign-currency and interest rate derivative agreements with third
parties, and requiring Xerox to immediately repurchase certain then-
outstanding derivative agreements in accordance with their terms. On October
23, 2001, S&P reduced its rating of XC's and our senior debt to below
investment grade, further constraining Xerox's and our ability to enter into
new derivative agreements.  The downgrade also required Xerox and us to
immediately repurchase certain of our then-outstanding out-of-the-money
derivative agreements.  Total Xerox contracts repurchased totaled $148 million
of which $140 million were ours.  To minimize the resulting interest and
currency exposures, we replaced certain of our terminated contracts with new
derivative contracts involving a new counterparty, which will require us to
collateralize any out-of-the-money positions going forward.  As of October 31,
2001, Xerox's remaining derivative portfolio included $15 million of out-of-
the money contracts which are contractually subject to termination by the
applicable counterparties.  All of those contracts are ours.  The fair market
values of all of our derivative agreements change with fluctuations in
interest rates (and currency rates where applicable), as discussed below.

In the third quarter 2000, we securitized certain contracts receivable in the
United States, generating gross proceeds of $411 million.  This revolving
facility was accounted for as a secured borrowing.

In the third quarter 2000, Xerox Corporation securitized certain accounts
receivable in the United States, generating gross proceeds of $315 million.
This revolving facility was accounted for as a sale of receivables.  In
December 2000, as a result of the senior debt downgrade by Moody's discussed
above, XC renegotiated the $315 million accounts receivable securitization
facility, reducing the facility size to $290 million.  The facility size will
remain at $290 million unless and until XC's senior debt is downgraded to or
below a Ba2 rating by Moody's, at which time XC would seek to renegotiate the
terms of the facility.

As described above, our current ability to enter into new derivative contracts
is severely constrained.  Therefore, while our overall risk management
strategy is as explained below, our ability to employ that strategy
effectively has been severely limited. Any further downgrades of XC's or our
debt could further limit our ability to execute this risk management strategy
effectively.

We are exposed to market risk from changes in interest rates that could affect
results of operations and financial condition.  To assist in managing our
interest rate exposure and match funding our principal assets, we routinely
used certain financial instruments, primarily interest rate swap agreements.
In general, our objective was to hedge our variable-rate debt by paying fixed
rates under the swap agreements while receiving variable-rate payments in
return.  Additionally, in order to manage our outstanding commercial paper, we
issued variable- and fixed-rate medium term notes, which are swapped to LIBOR-
based rates.  We do not enter into derivative instrument transactions for
trading purposes and employ long-standing policies prescribing that derivative
instruments are only to be used to achieve a set of very limited match funding
and liquidity objectives.

Pursuant to a Support Agreement between XC and us, XC has agreed to retain
ownership of 100 percent of our voting capital stock and to make periodic
payments to the extent necessary to ensure that our annual pre-tax earnings
available for fixed charges equals at least 1.25 times our fixed charges.  No
such payments were made during the period covered by this report.

Although not required by either the Support or Operating agreement, we have
entered into an intercompany cross-currency interest rate swap with XC with
respect to 115 billion of Yen borrowings with a current value of $122 million.
This transaction was designed to protect us from the market risk resulting
from the cancellation of certain derivative agreements discussed above.

Item 3.  Quantitative and Qualitative Disclosures About Market Risk

The information set forth under the caption "Capital Resources and Liquidity"
in Item 2 above is hereby incorporated by reference in answer to this Item.




PART II.  OTHER INFORMATION

Item 1.   Legal Proceedings

          None.

Item 2.   Changes in Securities

          None.

Item 3.   Defaults Upon Senior Securities

          None.

Item 4.   Submission of Matters to a Vote of Security Holders

          None.

Item 5.   Other Information

          None.

Item 6.   Exhibits and Reports on Form 8-K

          (a)   Exhibits

                Exhibit 3   (a) Articles of Incorporation of Registrant filed
                                with the Secretary of State of Delaware on
                                June 23, 1980.

                                Incorporated by reference to Exhibit 3(a) to
                                Registrant's Annual Report on Form 10-K for
                                the Year ended December 31, 1999.

                            (b) By-Laws of Registrant, as amended through
                                September 1, 1992.

                                Incorporated by reference to Exhibit 3(b)
                                to Registrant's Quarterly Report for the
                                Quarter ended March 31, 1997.

                Exhibit 12  (a) Computation of the Company's Ratio of
                                Earnings to Fixed Charges.

                            (b) Computation of Xerox's Ratio of Earnings
                                to Fixed Charges.

          (b)   Reports on Form 8-K.

                A Current Report on Form 8-K dated September 11, 2001
                reporting Item 5 "Other Events" was filed during the
                quarter for which this Quarterly Report is filed.




                                  SIGNATURE


Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.



                                       XEROX CREDIT CORPORATION



November 14, 2001                          BY: /S/ John F. Rivera

                                           John F. Rivera
                                           Vice President, Treasurer and
                                           Chief Financial Officer