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:  June 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 July 31, 2001
Common Stock                                               2,000



                      THIS DOCUMENT CONSISTS OF 17 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"). 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 effective and timely elimination of employees, closing and consolidation
of facilities, outsourcing of certain manufacturing and logistics operations,
reductions in operational expenses and the successful implementation of
process and systems changes.

Xerox's liquidity is currently provided through its own cash generation from
operations and various financing strategies including securitizations. XC 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.
In the near-term 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.  Xerox has also embarked
upon a process of selling certain assets with the objective of generating
proceeds for the purpose of retiring outstanding debt.

Thus, Xerox's liquidity is dependent upon the timely implementation and
execution of the various turnaround program initiatives as well as its ability
to generate positive cash flow from operations and various financing
alternatives, including securitizations.




                       XEROX CREDIT CORPORATION
                               Form 10-Q
                              June 30, 2001


Table of Contents
                                                                  Page
Part I -  Financial Information

   Item 1. Financial Statements

      Consolidated Statements of Income                              4

      Consolidated Balance Sheets                                    5

      Consolidated Statements of Cash Flows                          6

      Notes to Consolidated Financial Statements                     7

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

      Results of Operations                                          9

      Capital Resources and Liquidity                               10

   Item 3. Quantitative and Qualitative Disclosures About
     Market Risk                                                    13

Part II - Other Information

   Item 1. Legal Proceedings                                        14

   Item 2. Changes in Securities                                    14

   Item 3. Defaults Upon Senior Securities                          14

   Item 4. Submission of Matters to a Vote of Security Holders      14

   Item 5. Other Information                                        14

   Item 6. Exhibits and Reports on Form 8-K                         14

Signature                                                           15

Exhibits

   Computation of Ratio of Earnings to Fixed Charges (Xerox
   Credit Corporation)                                              16

   Computation of Ratio of Earnings to Fixed Charges (Xerox
   Corporation)                                                     17




PART I.   FINANCIAL INFORMATION
Item 1.   Financial Statements

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

                                   Three Months Ended    Six Months Ended
                                        June 30,            June 30,
                                     2001     2000         2001     2000



Earned income:
   Contracts receivable            $  121    $  108      $  247   $  211
Expenses:
   Interest                            84        70         166      137
   Operating and administrative         3         3           6        6
   Derivative instruments fair value
   adjustments, net                     8         -           7        -
      Total expenses                   95        73         179      143

Income before income taxes             26        35          68       68

Provision for income taxes             10        14          26       27

Net income before cumulative effect    16        21          42       41
   of change in accounting
   principle

Cumulative effect of change in
   accounting principle                 -         -          (3)       -

Net income                         $   16    $   21      $   39   $   41


See accompanying notes.



                            XEROX CREDIT CORPORATION
                          CONSOLIDATED BALANCE SHEETS
                                 (In Millions)

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


Cash and cash equivalents                              $     -        $     -

Investments:
    Contracts receivable                                 6,214          6,355
    Unearned income                                       (721)          (755)
    Allowance for losses                                  (137)          (140)
        Total investments                                5,356          5,460

Derivative and other assets                                 18             34

        Total assets                                   $ 5,374        $ 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                 449            388
    Notes payable after one year                         3,450          3,665
    Secured borrowing due after one year                    89            191
    Due to Xerox Corporation, net                           80             98
    Accounts payable and accrued liabilities                25             24
    Derivative liabilities                                 149              -
    Deferred income taxes                                    -             20

        Total liabilities                                4,734          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
    Derivative losses on cash flow hedging                 (15)             -
    Retained earnings                                      413            374

        Total shareholder's equity                         640            616

        Total liabilities and shareholder's equity     $ 5,374        $ 5,494




See accompanying notes.











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

                                                             Six Months Ended
                                                                June 30,
                                                             2001       2000
Cash Flows from Operating Activities
  Net income                                               $   39     $   41
  Adjustments to reconcile net income to net cash
    provided by operating activities:
    Net change in operating assets and liabilities            (19)       (15)
    Loss on derivative instruments                              7          -

Net cash provided by operating activities                      27         26

Cash Flows from Investing Activities
  Purchases of investments                                   (912)    (1,200)
  Proceeds from investments                                 1,017        887
  Proceeds from sale of other assets                           23          -

Net cash provided by (used in) investing activities           128       (313)

Cash Flows from Financing Activities
  Change in commercial paper, net                             (32)       888
  Change in notes with Xerox and affiliates, net               (4)      (711)
  Proceeds from long-term debt                                  -      1,525
  Principal payments on long-term debt                       (119)    (1,415)

Net cash provided by (used in) financing activities          (155)       287


  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 (consisting only of 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)  During 2000, the Company transferred $457 million of finance receivables
to a wholly-owned qualifying bankruptcy-remote special purpose entity for cash
proceeds of $411 million and a retained interest of $46 million. In connection
with the reduction of  XC's and the Company's debt rating to below investment
grade, XC subsequently renegotiated this securitization transaction resulting
in a one-time principal payment of approximately $40 million.  This payment
helped reduce the outstanding balance on that amortizing facility to $232 at
June 30, 2001. Since this transaction was accounted for as a secured
borrowing, the balance sheet continues to reflect the receivables and related
debt obligation.  The earnings impact of this transaction was not material.

(4)  We adopted Statement of Financial Accounting Standards No. 133,
"Accounting for Derivative Instruments and Hedging Activities," (SFAS No. 133)
and SFAS 138 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 133 is expected to 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 FAS 133 activity during the first half:

                           XEROX CREDIT CORPORATION
                  Notes to Consolidated Financial Statements


Interest Rate/Cross Currency Swaps.  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 will result in
mark-to-market valuation of these derivatives directly through earnings, which
will lead to increased volatility in our earnings.

The net gain/(loss) from the mark-to-market valuation of our interest rate
derivatives recorded in earnings was approximately $(1) million and $(34)
million for the second quarter and year to date periods, 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 half. The net
gain/(loss) from the mark-to-market valuation of certain cross currency
interest rate swap agreements was $(7) and $27 million for the second quarter
and year to date periods, 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 half 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 second
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 approximately $480 million.
The remaining cash proceeds of approximately $30 million will be held in
reserve over the term of the asset backed notes.  As part of the transaction,
we sold approximately $628 million of domestic finance receivables to XC. XC
then sold the receivables to a qualified special purpose entity in which XC
has a retained interest of approximately $148 million, including the cash
proceeds held in reserve.




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

RESULTS OF OPERATIONS
The sole business of our Company is to purchase long-term accounts 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 are sold to us.  Long-term receivables arising from tax-exempt transactions
with state and local government customers are retained by XC.

Contracts receivable income represents income earned under an agreement with
XC pursuant to which we undertake the purchases noted above. The receivables
arise 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 $121 million and $108 million for the second quarter
of 2001 and 2000, respectively, and $247 million and $211 million for the
first six months of 2001 and 2000, respectively. The increase from 2000 to
2001 is due to an increase in portfolio size and higher yields in the first
six months of 2001 as compared to the first six months of 2000.

Interest expense was $84 million and $70 million for the second quarter of
2001 and 2000, respectively and $166 million and $137 million for the first
six months of 2001 and 2000, respectively. The increase is due to a larger
portfolio and an increase in our cost of debt.

Prior to the fourth quarter of 2000, we had employed a match funding policy
for customer financing assets and related liabilities. Under this policy, the
interest and currency characteristics of the indebtedness were, in most cases,
matched to the interest and currency characteristics of the finance
receivables. The recent downgrades of our debt and XC's debt significantly
changed the nature of our indebtedness and substantially reduced our ability
to continue our historical match funding policy. Instead, we 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 second
quarter of 2001 and 2000 and $6 million for both the first half of 2001 and
2000. These expenses are incurred to administer the contracts receivable
purchased from XC.

The effective income tax rate for the second quarter and first half of 2001
was 38.9%, unchanged from the second 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. Notwithstanding the impacts of
the debt rating downgrades on 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 will result in mark-to-market valuation of these derivatives
directly through earnings, which will increase volatility in our earnings.

The net gain/(loss) from the mark-to-market valuation of our interest rate
derivatives recorded in earnings was approximately $(1) million and $(34)
million for the second quarter and year to date periods, 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 half. The net
gain/(loss) from the mark-to-market valuation of certain cross currency
interest rate swap agreements was $(7) and $27 million for the second quarter
and year to date periods, 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 half reflects the decline in variable rates
partially offset by related changes in exchange rates.

Historically, it has been our intent to target a return on equity of 15
percent.  Based on our results through June 30, 2001 our full year return on
equity would be approximately 13 percent.  This is primarily due to the
effects of SFAS 133.  Since the effects of SFAS 133 should net to zero over
the terms of the related swaps, it is our current intention to target a return
on equity of 15 percent prior to the effects of SFAS 133.

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 $27 million in the first six
months of 2001 compared to $26 million during the same period in 2000.

Net cash provided by investing activities was $128 million in the first six
months of 2001 compared to $313 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 $155 million during the first six months of 2001,
versus $287 million provided by financing activities during the same period in
2000. During the first six 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 $119 million while net notes
with XC and affiliates used an additional $4 million.

During 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
August 7, 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 BBB- and A-3, respectively, and the ratings outlook is
negative. 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.  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.

Consequently, in the fourth quarter 2000, XC and its eligible subsidiaries
together drew down the entire $7.0 billion available under 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 June 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 June
30, 2001, Xerox's CTNW was $489 million in excess of the minimum requirement,
a decrease of $111 million from the December 31, 2000 level. Further operating
losses, restructuring costs and adverse currency translation adjustments would
erode this excess, while operating income, gains on asset sales, additional
exchanges of debt for equity and favorable currency translation would improve
this excess.

As of June 30, 2001, we had approximately $0.4 billion of debt maturing
during the remainder of 2001, and $1.8 billion maturing in 2002, as summarized
below ($ billions):

                                           2001        2002
            First Quarter                              $0.0
            Second Quarter                              0.1
            Third Quarter                  $0.1         0.0
            Fourth Quarter                  0.3         1.7*
            Full Year                      $0.4        $1.8

* Includes $1.0 billion maturing under the Revolver

As of June 30, 2001, Xerox, including us, had approximately $1.4 billion of
debt expected to be repaid during the remainder of 2001.

Neither Xerox nor we have any other material obligations scheduled to mature
in the remainder of 2001 unless Xerox's and/or our debt ratings are further
downgraded, as discussed below.

Xerox is implementing a global Turnaround Program which includes initiatives
to reduce costs on an annualized basis by at least $1 billion by the end of
2001, improve operations, and sell certain assets. We believe these actions
will positively affect Xerox's capital resources and liquidity position when
completed. In connection with these initiatives, Xerox announced and completed
the sale of its China operations to Fuji Xerox Co., Ltd. ("Fuji Xerox") in the
fourth quarter of 2000, which generated $550 million of cash and transferred
debt of $118 million to Fuji Xerox. In March 2001, Xerox sold half of its
ownership interest in Fuji Xerox to Fuji Photo Film Co., Ltd. for $1,283
million in cash.

Xerox has initiated discussions to implement third-party vendor financing
programs which, when implemented, will significantly reduce Xerox's and our
debt and finance 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. As of June 30, 2001, the remaining balance of this secured
borrowing was $243 million. 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 certain retained interests. 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 securities, supported by domestic finance receivables,
for cash proceeds of $483 million and certain retained interests. These
domestic finance receivables were purchased from us and the proceeds used to
reduce notes payable to XC.

The initiative to implement vendor financing programs is expected to
significantly reduce or eliminate the creation of new finance receivables for
Xerox. Accordingly, we may no longer be purchasing such receivables and the
existing portfolio would ultimately be collected. Further, 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 reduce the portfolio
owned by us.

Xerox believes its liquidity is presently sufficient to meet current and
anticipated needs going forward, subject to timely implementation and
execution of the various global initiatives discussed above. Should Xerox not
be able to successfully complete these initiatives in a timely or satisfactory
manner, 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 debt to
below investment grade, significantly constraining our ability to enter into
new foreign-currency and interest rate derivative agreements with third
parties, and required Xerox to immediately repurchase certain of their then-
outstanding derivative agreements. To minimize the resulting exposures, Xerox
also voluntarily terminated other derivative agreements.  At June 30, 2001,
Xerox's remaining derivative portfolio with third parties has a net positive
value of approximately $33 million (included in this $33 million is a net
negative value for us of approximately $133 million). Should Xerox and/or our
debt ratings be downgraded by Standard and Poors to below investment grade, we
may be required to repurchase certain of the out-of-the-money derivative
agreements currently in place, in the approximate aggregate amount, as of June
30, 2001, of $124 million (included in this $124 million is $116 million for
us). However, it is also possible that some counterparties may require, or
agree to, the repurchase of certain of our in-the-money derivatives currently
in place, which could reduce this cash requirement.

There is no assurance that our credit ratings or Xerox's credit ratings will
be maintained, or that various counterparties to derivative agreements would
not require us to repurchase the obligations in cases where the agreements
permit such termination.

As described above, our current ability to enter into new derivative contracts
is severely constrained.  Consequently, we have not entered into interest rate
swap agreements with third parties subsequent to October 2000.  Therefore,
while our overall risk management strategy is explained below, our ability to
employ that strategy effectively has been severely limited. Any further
downgrades of our debt or XC's 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.

As of June 30, 2001, our overall debt-to-equity ratio was 7.2 to 1. Under the
terms of the Amended and Restated Operating Agreement, XC has the option, but
no obligation, to transfer additional funds to us in order to maintain such
ratio at a specific level. No such transfers were made during the period
covered by this report. It is our intention to maintain the debt-to-equity
ratio at no greater than 8.0 to 1.

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 on 115
billion of Yen borrowings with a current value of $158 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.

                Current reports on Form 8-K dated April 2, 2001 and April 26,
                2001 reporting Item 5 "Other Events" were 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



August 10, 2001                           BY: /S/ Richard Ragazzo

                                       Richard Ragazzo
                                       Vice President, Treasurer and
                                       Chief Financial Officer