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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(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, 2007

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 incorporation or organization) |  | (I.R.S. Employer Identification No.)
|                                                               | 
|P.O. Box 4505 45
Glover Avenue Norwalk, Connecticut            |  | 06856-4505                          
|(Address of principal executive offices)                       |  | (Zip Code)                          

(203) 968-3000

(Registrants telephone number, including area code)

100 First Stamford Place

Stamford, Connecticut 06904

(Former address)

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  x    No   ̈

Indicate by a check mark whether the Registrant is a large
accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of accelerated filer and large accelerated filer in Rule 12b-2 of the Exchange Act.    Large accelerated filer   ̈    Accelerated filer   ̈    Non-accelerated filer  x

Indicate by a check mark whether the
Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    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,
2007
|Common Stock |  | 2,000                             

THE REGISTRANT MEETS THE CONDITIONS SET FORTH IN GENERAL INSTRUCTIONS H(1)(a) AND (b) OF FORM 10-Q AND
IS THEREFORE FILING THIS FORM WITH THE REDUCED DISCLOSURE FORMAT.





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Forward-Looking Statements

This Quarterly Report on Form 10-Q and any exhibits to this Report may contain forward-looking statements as defined in the Private Securities Litigation Reform Act of 1995. The words
anticipate, believe, estimate, expect, intend, will, should and similar expressions, as they relate to us, are intended to identify forward-looking statements. These
statements reflect managements current beliefs, assumptions and expectations and are subject to a number of factors that may cause actual results to differ materially. The primary factor is the liquidity of our ultimate parent company, Xerox
Corporation. Other factors include, but are not limited to, the risks that are set forth in the Risk Factors section, the Managements Discussion and Analysis of Financial Condition and Results of Operations section and
other sections of this Quarterly Report on Form 10-Q, as well as in our Quarterly Reports on Form 10-Q for the quarters ended March 31, 2007 and June 30, 2007 and our 2006 Form 10-K filed with the Securities and Exchange Commission
(SEC). The company assumes no obligation to update any forward-looking statements as a result of new information or future events or developments, except as required by law.



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XEROX CREDIT CORPORATION

Form 10-Q

September 30, 2007

Table of Contents



|                                                                                              |  |     
|--------------------------------------------------------------------------------------------- |  | ----
|                                                                                              |  | Page
|Part I Financial Information                                                                 |  |     
|Item 1. Financial Statements (Unaudited)                                                      |  | 4   
|Condensed Balance Sheets                                                                      |  | 4   
|Condensed Statements of Income                                                                |  | 5   
|Condensed Statements of Cash Flows                                                            |  | 6   
|Notes to Condensed Financial Statements                                                       |  | 7   
|Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations |  | 8   
|Results of Operations                                                                         |  | 8   
|Capital Resources and Liquidity                                                               |  | 8   
|Item 4T. Controls and Procedures                                                              |  | 13  
|Part IIOther Information                                                                     |  |     
|Item 1. Legal Proceedings                                                                     |  | 14  
|Item 1A. Risk Factors                                                                         |  | 14  
|Item 6. Exhibits                                                                              |  | 15  
|Signatures                                                                                    |  | 16  
|Exhibit(s)                                                                                    |  | 17  



| | Exhibit 3 (a) | Articles of Incorporation of Registrant filed with the Secretary of State of Delaware on September 23, 1980, as amended by Certificates of Amendment thereto filed
with the Secretary of State of Delaware on September 12, 1980 and September 19, 1988, as further amended by Certificate of Change of Registered Agent filed with the Secretary of State of Delaware on October 7, 1986, Certificate of
Ownership and Merger filed with the Secretary of State of Delaware on April 30, 1992 and Certificate of Correction of Certificate of Ownership and Merger filed with the Secretary of State of Delaware on March 3, 1994.
| | ------------- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | Exhibit 3 (b) | By-Laws of Registrant, as amended through September 1, 1992.
| | ------------- | ------------------------------------------------------------



| | Exhibit 31 (a) | Certification of CEO Pursuant to Rule13a-14(a) or Rule15d-14(a).
| | -------------- | ----------------------------------------------------------------



| | (b) | Certification of CFO Pursuant to Rule13a-14(a) or Rule15d-14(a).
| | --- | ----------------------------------------------------------------



| | Exhibit 32 | Certification of CEO and CFO Pursuant to 18 U.S.C. Section 1350, as adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
| | ---------- | --------------------------------------------------------------------------------------------------------------------------------------



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##### Table of Contents

PART IFINANCIAL INFORMATION

Item 1

XEROX CREDIT CORPORATION

CONDENSED BALANCE SHEETS (UNAUDITED)

(in millions)

ASSETS



|                                                                            |  |                   |       |                  |   |      
|--------------------------------------------------------------------------- |  | ----------------- | ----- | ---------------- | - | -----
|                                                                            |  | September 30,2007 |       | December 31,2006
|Assets:                                                                     |  |                   |       |                  |   |      
|Note receivableXerox Corporation                                           |  | $                 | 1,147 |                  | $ | 1,422
|Other assets                                                                |  |                   | 4     |                  |   | 4    
|                                                                            |  |                   |       |                  |   |      
|Total Assets                                                                |  | $                 | 1,151 |                  | $ | 1,426
|                                                                            |  |                   |       |                  |   |      
|LIABILITIES AND SHAREHOLDERS EQUITY                                       
|Liabilities:                                                                |  |                   |       |                  |   |      
|Current portion of notes payable                                            |  | $                 |      |                  | $ | 277  
|                                                                            |  |                  
|Notes payable after one year                                                |  |                   | 160   |                  |   | 185  
|Due to Xerox Corporation, net                                               |  |                   | 3     |                  |   | 6    
|Other liabilities                                                           |  |                   | 2     |                  |   | 4    
|                                                                            |  |                   |       |                  |   |      
|Total Liabilities                                                           |  |                   | 165   |                  |   | 472  
|                                                                            |  |                   |       |                  |   |      
|Shareholders Equity:                                                       |  |                   |       |                  |   |      
|Common stock, no par value, 2,000 shares authorized, issued and outstanding |  |                   | 23    |                  |   | 23   
|Additional paid-in-capital                                                  |  |                   | 219   |                  |   | 219  
|Retained Earnings                                                           |  |                   | 744   |                  |   | 712  
|                                                                            |  |                   |       |                  |   |      
|Total Shareholders Equity                                                  |  |                   | 986   |                  |   | 954  
|                                                                            |  |                   |       |                  |   |      
|Total Liabilities and Shareholders Equity                                  |  | $                 | 1,151 |                  | $ | 1,426
|                                                                            |  |                   |       |                  |   |      

The accompanying notes are an integral part of these Condensed Financial Statements.



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XEROX CREDIT CORPORATION

CONDENSED STATEMENTS OF INCOME (UNAUDITED)

(in millions)



|                                         |  |                                  |    |                                 |   |      |  |      |    |  |   |   
|---------------------------------------- |  | -------------------------------- | -- | ------------------------------- | - | ---- |  | ---- | -- |  | - | --
|                                         |  | Three Months Ended September 30, |    | Nine Months Ended September 30,
|                                         |  | 2007                             |    | 2006                            |   | 2007 |  | 2006
|Earned Income from Xerox note receivable |  | $                                | 20 |                                 | $ | 27   |  | $    | 70 |  | $ | 78
|Expenses:                                |  |                                  |    |                                 |   |      |  |      |    |  |   |   
|Interest                                 |  |                                  | 3  |                                 |   | 8    |  |      | 17 |  |   | 25
|Loss on derivative instruments, net      |  |                                  |   |                                 |   | 2    |  |      | 1  |  |   | 3 
|General and administrative               |  |                                  |   |                                 |   |     |  |      | 1  |  |   |  
|                                         |  |                                  |    |                                 |   |      |  |      |    |  |   |   
|Total Expenses                           |  |                                  | 3  |                                 |   | 10   |  |      | 19 |  |   | 28
|                                         |  |                                  |    |                                 |   |      |  |      |    |  |   |   
|Income before income taxes               |  |                                  | 17 |                                 |   | 17   |  |      | 51 |  |   | 50
|Provision for income taxes               |  |                                  | 6  |                                 |   | 7    |  |      | 19 |  |   | 19
|                                         |  |                                  |    |                                 |   |      |  |      |    |  |   |   
|Net Income                               |  | $                                | 11 |                                 | $ | 10   |  | $    | 32 |  | $ | 31
|                                         |  |                                  |    |                                 |   |      |  |      |    |  |   |   

The accompanying notes are an integral part of these Condensed Financial Statements.



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XEROX CREDIT CORPORATION

CONDENSED STATEMENTS OF CASH FLOWS (UNAUDITED)

(in millions)



|                                                                                  |  |                                 |      |   |      |   |     |  
|--------------------------------------------------------------------------------- |  | ------------------------------- | ---- | - | ---- | - | --- | -
|                                                                                  |  | Nine Months Ended September 30, |     
|                                                                                  |  | 2007                            |      |   | 2006 |  
|Cash Flows from Operating Activities                                              |  |                                 |      |   |      |   |     |  
|Net income                                                                        |  | $                               | 32   |   |      | $ | 31  |  
|Adjustments to reconcile net income to net cash provided by operating activities: |  |                                 |      |   |      |   |     |  
|Loss on derivative instruments, net                                               |  |                                 | 1    |   |      |   | 3   |  
|Net change in other assets and other liabilities                                  |  |                                 | (5   | ) |      |   | (24 | )
|                                                                                  |  |                                 |      |   |      |   |     |  
|Net cash provided by operating activities                                         |  |                                 | 28   |   |      |   | 10  |  
|                                                                                  |  |                                 |      |   |      |   |     |  
|Cash Flows from Investing Activities                                              |  |                                 |      |   |      |   |     |  
|Net repayments of loans from (to) Xerox Corporation                               |  |                                 | 297  |   |      |   | (10 | )
|                                                                                  |  |                                 |      |   |      |   |     |  
|Net cash provided by (used in) investing activities                               |  |                                 | 297  |   |      |   | (10 | )
|                                                                                  |  |                                 |      |   |      |   |     |  
|Cash Flows from Financing Activities                                              |  |                                 |      |   |      |   |     |  
|Cash payments on debt                                                             |  |                                 | (296 | ) |      |   |    |  
|Settlement of derivative instruments                                              |  |                                 | (29  | ) |      |   |    |  
|                                                                                  |  |                                 |      |   |      |   |     |  
|Net cash used in financing activities                                             |  |                                 | (325 | ) |      |   |    |  
|                                                                                  |  |                                 |      |   |      |   |     |  
|Cash and cash equivalents, beginning of period                                    |  |                                 |     |   |      |   |    |  
|                                                                                  |  |                                 |      |   |      |   |     |  
|Cash and cash equivalents, end of period                                          |  | $                               |     |   |      | $ |    |  
|                                                                                  |  |                                 |      |   |      |   |     |  

The accompanying notes are an integral part of these Condensed Financial Statements.



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XEROX CREDIT CORPORATION

NOTES TO CONDENSED FINANCIAL STATEMENTS

(Dollars in millions, unless otherwise indicated)

(1) Basis of Presentation:

References
herein to we, us, our and the Company refer to Xerox Credit Corporation unless the context specifically requires otherwise.

We have prepared the accompanying unaudited condensed interim financial statements in accordance with the accounting policies described in our 2006 Annual Report on Form 10-K (2006 Annual
Report), and the interim reporting requirements of Form 10-Q. Accordingly, certain information and note disclosures normally included in annual financial statements prepared in accordance with accounting principles generally accepted in the
United States of America have been condensed or omitted. You should read these Condensed Financial Statements in conjunction with the financial statements included in our 2006 Annual Report.

In our opinion, all adjustments which are necessary for a fair statement of financial position, operating results and cash flows for the interim
periods presented have been made. Interim results of operations are not necessarily indicative of the results of the full year.

We
engage in extensive intercompany transactions with Xerox Corporation (XC and together with its subsidiaries, Xerox) and receive all of our operational and administrative support from XC. By their nature, transactions
involving related parties cannot be presumed to be carried out on the same basis as transactions among wholly-unrelated parties.

(2) Income
Taxes:

We adopted the provisions of FASB Interpretation No. 48, Accounting for Uncertainty in Income Taxes  an
Interpretation of FASB Statement No. 109 (FIN 48), on January 1, 2007. FIN 48 clarifies the accounting for uncertainty in income taxes by prescribing a minimum recognition threshold for a tax position taken or expected to
be taken in a tax return that is required to be met before being recognized in the financial statements. FIN 48 also provides guidance on derecognition, measurement, classification, interest and penalties, accounting in interim periods, disclosure
and transition. There was no cumulative effect of adopting FIN 48. The total amount of unrecognized tax benefits as of the date of adoption was $2.

We recognize interest and penalties accrued on unrecognized tax benefits as well as interest received from favorable settlements within income tax expense. As of the date of adoption, interest and penalties accrued associated
with unrecognized tax benefits were less than $1.

We are included within the consolidated XC US federal income tax return. XC is no
longer subject to U.S. federal income tax examinations by tax authorities for years before 2006.

(3) Due to/from Xerox:

Demand loans to XC totaled $1,147 and the interest rate in effect at September 30, 2007 was 6.69%.

From time to time we receive non-interest bearing advances from XC to primarily cover the unpaid portion of income taxes as determined in
accordance with our Tax Allocation Agreement with XC. Amounts payable to XC were $3 and $6 as of September 30, 2007 and December 31, 2006, respectively, and are reported in our Condensed Balance Sheets as Due to Xerox Corporation, net.

Intercompany cross-currency interest rate derivative instruments with XC had a net liability fair value of $22 as of
December 31, 2006, and were netted against the demand loan balance. The intercompany derivative instruments were settled in June 2007 for $29 in conjunction with the repayment of our 2% Yen Denominated Medium Term Notes at maturity.



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

Because our liquidity is dependent upon the liquidity of XC, Item 2 includes both our Managements Discussion and Analysis of Financial Condition and Results of Operations (MD&A) and portions of XCs MD&A
from its Quarterly Report on Form 10-Q for the quarter ended September 30, 2007. Each MD&A, or portion thereof, is separately presented. Certain matters discussed in XCs MD&A will relate to events and transactions that do not
affect us directly.

RESULTS OF OPERATIONSXEROX CREDIT CORPORATION

Earned income from the Master Demand Note, which
represents a demand loan for accumulated cash transfers to XC, was $20 million and $27 million for the third quarters of 2007 and 2006, respectively, and $70 million and $78 million for the nine months ended September 30, 2007 and 2006,
respectively. The decrease in both periods primarily relates to a lower average note balance due to repayments by XC under the Master Demand Note that we subsequently used to repay third-party debt.

Interest expense was $3 million and $8 million for the third quarters of 2007 and 2006, respectively, and $17 million and $25 million for the nine
months ended September 30, 2007 and 2006, respectively. The decreases primarily relate to lower debt levels resulting from the repayment of maturing debt as well as early redemption of $50 million of our Medium Term Notes due in 2012.

The effective income tax rate was 37.4% and 37.5% for the third quarters of 2007 and 2006, respectively, and 37.4% and 38.0% for the
nine months ended September 30, 2007 and 2006, respectively. The changes in effective tax rates primarily reflect the changes in the applicable state tax rates.

CAPITAL RESOURCES AND LIQUIDITYXEROX CREDIT CORPORATION

Net cash provided by operating activities
was $28 million and $10 million for the nine months ended September 30, 2007 and 2006, respectively. The increase in cash flow was primarily due to tax payments made in the prior year of $25 million associated with realized taxable gains on
debt paid in 2005 partially offset by the timing of current year tax payments.

Net cash provided by investing activities was $297
million for the nine months ended September 30, 2007 compared to $10 million used for the nine months ended September 30, 2006. Cash provided by investing activities in 2007 consisted of collections on the demand note of $325 million used
to repay debt and to settle intercompany derivatives, partially offset by a reduction of $28 million of net advances to Xerox (the net advances consisted of additional loans to Xerox of $70 million from interest on the demand loan, net of $42
million of collections primarily for the payment of taxes and interest). Cash used in investing activities for the nine months ended September 30, 2006 consisted of $78 million of additional loans to Xerox from interest on the demand note that
was partially offset by $68 million of collections on the demand note primarily for the payment of taxes and interest.

Net cash used
in financing activities was $325 million for the nine months ended September 30, 2007, reflecting the June 2007 debt payments of $246 million for our maturing 2.00% Yen denominated Medium Term Notes and $50 million for the early redemption of a
portion of our Medium Term Notes due 2012 as well as $29 million for the settlement of intercompany derivative instruments economically hedging the Yen denominated debt. No cash was used in or provided by financing activities in 2006.

As of September 30, 2007, we had $160 million of debt outstanding all of which is due in 2012 and thereafter. We believe that the amounts due
under the Master Demand Note from XC of $1.1 billion at September 30, 2007 will be sufficient to meet our remaining obligations as they mature.

Financial Risk Management

Given the limited nature of our operations, our exposures are limited to the
interest rate exposures embedded in the remaining unpaid debt and will further decrease over time as debt is repaid. Our Master Demand Note with XC earns interest at a market rate.



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READERS NOTE: THE FOLLOWING DISCUSSION HAS BEEN EXCERPTED DIRECTLY FROM XEROX CORPORATIONS QUARTERLY
REPORT ON FORM 10-Q FOR THE QUARTER ENDED SEPTEMBER 30, 2007. DEFINED TERMS HEREIN MAY NOT NECESSARILY HAVE THE SAME MEANING AS THE SAME DEFINED TERMS HAVE IN OTHER PARTS OF THIS DOCUMENT. SUCH TERMS SHOULD BE READ IN THE NARROW CONTEXT IN WHICH
THEY ARE DEFINED IN THIS SECTION. REFERENCES TO WE, OUR, AND US REFER TO XEROX CORPORATION. ADDITIONALLY, AMOUNTS AND EXPLANATIONS CONTAINED IN THIS SECTION ARE MEANT TO GIVE THE READER ONLY A GENERAL SENSE OF
XCS CAPITAL RESOURCES AND LIQUIDITY. ACCORDINGLY, THESE EXCERPTS SHOULD BE READ IN THE CONTEXT OF THE XC CONSOLIDATED FINANCIAL STATEMENTS, WHICH ARE INCLUDED IN XEROX CORPORATIONS QUARTERLY REPORT ON FORM 10-Q FOR THE QUARTER ENDED
SEPTEMBER 30, 2007 FILED SEPARATELY WITH THE SEC.

Capital Resources and Liquidity

The following table summarizes our cash flows and cash, cash equivalents and short-term investments as of and for the nine months ended September 30, 2007 and 2006:



|                                                             |  |                                 |        |   |      |   |       |               |  |   |        |  
|------------------------------------------------------------ |  | ------------------------------- | ------ | - | ---- | - | ----- | ------------- |  | - | ------ | -
|                                                             |  | Nine Months Ended September 30, |       
|(in millions)                                                |  | 2007                            |        |   | 2006 |   |       | Amount Change | 
|Net cash provided by operating activities                    |  | $                               | 861    |   |      | $ | 897   |               |  | $ | (36    | )
|Net cash used in investing activities                        |  |                                 | (1,602 | ) |      |   | (127  | )             |  |   | (1,475 | )
|Net cash provided by (used in) financing activities          |  |                                 | 144    |   |      |   | (778  | )             |  |   | 922    |  
|Effect of exchange rate changes on cash and cash equivalents |  |                                 | 46     |   |      |   | 22    |               |  |   | 24     |  
|                                                             |  |                                 |        |   |      |   |       |               |  |   |        |  
|(Decrease) increase in cash and cash equivalents             |  |                                 | (551   | ) |      |   | 14    |               |  |   | (565   | )
|Cash and cash equivalents at beginning of period             |  |                                 | 1,399  |   |      |   | 1,322 |               |  |   | 77     |  
|                                                             |  |                                 |        |   |      |   |       |               |  |   |        |  
|Cash and cash equivalents at end of period                   |  |                                 | 848    |   |      |   | 1,336 |               |  |   | (488   | )
|Short-term investments                                       |  |                                 |       |   |      |   | 120   |               |  |   | (120   | )
|                                                             |  |                                 |        |   |      |   |       |               |  |   |        |  
|Total cash, cash equivalents and short-term investments      |  | $                               | 848    |   |      | $ | 1,456 |               |  | $ | (608   | )
|                                                             |  |                                 |        |   |      |   |       |               |  |   |        |  

Cash Flows from Operating Activities

Net cash provided by operating activities of $861 million for the nine months ended September 2007 decreased $36 million from the nine months ended September 2006 primarily due to the following:

| |  |  | $251 million increase in pre-tax income before restructuring.
| | - |  | -------------------------------------------------------------

| |  |  | $124 million decrease due to higher accounts receivable primarily reflecting increased revenue as well as the timing of collections. The third quarter 2007 also included a
$64 million sale of receivables.
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  |  | $87 million decrease primarily due to a reduction in accounts payable based on timing of payments.
| | - |  | --------------------------------------------------------------------------------------------------

| |  |  | $73 million decrease due to lower net run-off of finance receivables.
| | - |  | ---------------------------------------------------------------------

Cash Flows from Investing Activities

Net cash used in investing activities was $1,602 million for the nine months
ended September 2007. The decrease in cash flow of $1,475 million from the nine months ended September 2006 was primarily due to the following:

| |  |  | $1,382 million decrease due to $1,531 million acquisition of GIS in 2007 as compared to $175 million acquisition of Amici LLC in 2006.
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------

| |  |  | $153 million decrease primarily as a result of a $119 million 2006 distribution related to the sale of investments held by Ridge Re and a $21 million distribution from the
liquidation of our investment in Xerox Capital LLC in 2006.
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  |  | $64 million decrease due to higher capital and internal use software expenditures in 2007.
| | - |  | ------------------------------------------------------------------------------------------

| |  |  | $116 million increase due to a reduction in escrow and restricted investments in 2007, as 2006 included a $103 million escrow deposit related to the MPI litigation matter.
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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Cash Flows from Financing Activities

Net cash provided by financing activities was $144 million for the nine months ended September 2007. The increase in cash flows of $922 million from the nine months ended September 2006 was primarily due
to the following:

| |  |  | $569 million increase due to higher net cash proceeds from unsecured debt. This reflects the May 2007 issuance of the $1.1 billion Senior Notes, as well as, the issuances
of two zero coupon bonds in 2007 resulting in net proceeds of approximately $400 million and lower repayments on other unsecured debt in 2007 as compared to 2006. These higher net proceeds were partially offset by the March 2006 issuance of the $700
million Senior Notes and the August 2006 issuances of an additional $650 million of Senior Notes.
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  |  | $188 million increase due to lower purchases under our share repurchase program.
| | - |  | --------------------------------------------------------------------------------

| |  |  | $100 million increase due to the first quarter 2006 payment of our liability to Xerox Capital LLC in connection with their redemption of Canadian deferred preferred
shares.
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  |  | $43 million increase relating to the 2006 payment of preferred stock dividends. The conversion of our Series C Mandatory Convertible Preferred Stock occurred in the third
quarter of 2006.
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  |  | $36 million increase due to lower net repayments of secured financing.
| | - |  | ----------------------------------------------------------------------

Customer Financing Activities and Debt

The following represents our total finance assets associated with our lease and
finance operations:



|                                   |  |               |       |              |   |      
|---------------------------------- |  | ------------- | ----- | ------------ | - | -----
|                                   |  | September 30, |       | December 31,
|                                   |  | 2007          |       | 2006        
|Total Finance receivables, net (1) |  | $             | 7,848 |              | $ | 7,844
|Equipment on operating leases, net |  |               | 553   |              |   | 481  
|                                   |  |               |       |              |   |      
|Total Finance Assets, net          |  | $             | 8,401 |              | $ | 8,325
|                                   |  |               |       |              |   |      

(1) Includes (i) billed portion of finance receivables, net, (ii) finance receivables, net and
(iii) finance receivables due after one year, net as included in our Condensed Consolidated Balance Sheets.

As of September 30, 2007,
approximately 11% of total debt was secured by finance receivables and other assets compared to 29% at December 31, 2006.

In July 2007, we gave
notice to GE and repaid the outstanding £293 million (U.S. $593 million) loan under the U.K. secured funding program using a combination of the proceeds from our July $300 million private placement (refer to Note 10-Debt in the Condensed
Consolidated Financial Statements) a $75 million borrowing under our 2007 Credit Facility and cash on hand. In July 2007, we also delivered notice to GE to terminate our secured borrowing program in Canada effective July 31, 2008.

In July 2007, we completed a transaction with De Lage Landen (DLL) to purchase their 51% ownership interest in our lease financing joint venture in
the Netherlands (the DLL Joint Venture) for approximately $25 million. In connection with the purchase, the secured borrowings to DLL of approximately $153 million were repaid and the related finance receivables are no longer encumbered.
To fund the purchase and repayment we borrowed approximately $161 million of unsecured debt due July 1, 2008. Other than the repayment of the secured debt and the borrowing under a new unsecured bank facility, the effects from this transaction
were immaterial as the DLL Joint Venture continues to be consolidated in our financial statements.

Refer to Note 14-Subsequent Events in the
Condensed Consolidated Financial Statements for information related to our secured warehousing facility in France.

Liquidity, Financial
Flexibility and Funding Plans:

We manage our worldwide liquidity using internal cash management practices, which are subject to (1) the
statutes, regulations and practices of each of the local jurisdictions in which we operate, (2) the legal requirements of the agreements to which we are a party and (3) the policies and cooperation of the financial institutions we utilize
to maintain and provide cash management services.



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##### Table of Contents

Our credit ratings as of September 30, 2007 were as follows:



|                             |  |                      |  |          |  |                                                                                                                   
|---------------------------- |  | -------------------- |  | -------- |  | ------------------------------------------------------------------------------------------------------------------
|                             |  | Senior UnsecuredDebt |  | Outlook  |  | Comments                                                                                                          
|                             |  |                      | 
|Moodys Investors Service(1) |  | Baa3                 |  | Positive |  | The Moodys rating was upgraded from Ba1 in November 2006. Moodys affirmed the positive outlook on April 2, 2007.
|                             |  |                      | 
|Standard & Poors (S&P)(2)  |  | BBB-                 |  | Stable   |  | The S&P rating was upgraded from BB+ to investment grade, BBB-, in May 2007. Outlook is stable.                   
|                             |  |                      | 
|Fitch Ratings(3)             |  | BBB-                 |  | Stable   |  | The Fitch rating was upgraded from BB+ in August 2006. The stable outlook was affirmed on April 2, 2007.          

---

|(1) | In November 2006, Moodys upgraded the Senior Unsecured rating from Ba1 to Baa3, a one notch upgrade. Moodys maintains a Positive Outlook on the credit. In
conjunction with the upgrade to investment grade ratings for the senior unsecured debt, Moodys has withdrawn all Loss Given Default assessments and Speculative Grade Liquidity ratings as they are only appropriate for non-investment grade
issuers. Moodys ratings upgrades also included: Senior unsecured shelf registration to Baa3 from Ba1; Trust preferred to Ba1 from Ba2; subordinated shelf registration to Ba1 from Ba2 and preferred shelf registration to Ba1 from Ba2. On
April 2, 2007, Moodys affirmed its ratings and positive outlook on Xerox, stating they are not affected by our acquisition of GIS. On October 25, 2007 Moodys placed Xerox on review for a possible upgrade.
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|(2) | In May 2007, S&P upgraded the Senior Unsecured and Corporate Credit ratings from BB+ to BBB-, investment grade, with a stable outlook. At the same time, S&P
upgraded the ratings on Subordinated debt from BB- to BB+ and Preferred Stock from B+ to BB. The ratings upgrade followed our announcement that we completed our tender offer for GIS.
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|(3) | In August 2006, Fitch upgraded its debt ratings and assigned a stable outlook on Xerox. Fitch had upgraded the senior unsecured debt of Xerox from BB+ to BBB- and also
upgraded the Trust Preferred securities from BB- to BB, both one notch upgrades. On April 2, 2007, Fitch affirmed Xeroxs ratings and stable outlook following Xeroxs announcement of an agreement in principal to acquire GIS.
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Our credit ratings, which are periodically reviewed by major rating agencies, have substantially improved over the past three
years. We are currently rated investment grade by Moodys Investors Service, S&P and Fitch Ratings.

Acquisition of GIS:

Refer to Note 3-Acquisition of GIS in the Condensed Consolidated Financial Statements for additional information regarding this acquisition.

The acquisition of GIS resulted in an increase in our minimum operating lease commitments reported in our 2006 Annual Report on Form 10-K of approximately $65
million.

2007 Debt Activity:

In addition
to the repayments of secured debt totaling $1.2 billion and related refinancing thereof noted above, the following is a summary of our debt activity in 2007:



| |  |  | amended and restated our $1.25 billion unsecured revolving credit facility in April (now $2 billion);
| | - |  | -----------------------------------------------------------------------------------------------------

| |  |  | issued $1.1 billion of Senior Notes due 2012 in May; and
| | - |  | --------------------------------------------------------

| |  |  | issued $400 million of zero coupon bonds in private placement transactions in July/August.
| | - |  | ------------------------------------------------------------------------------------------



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##### Table of Contents

For more details on these transactions, see Note 10-Debt in the Condensed Consolidated Financial Statements.

SummaryFinancial Flexibility and Liquidity:

Our liquidity is a function of our ability to successfully generate cash flows from a combination of efficient operations and improvement therein, access to capital markets, securitizations, funding from third parties and borrowings secured
by our finance receivables portfolios. As of September 30, 2007, total cash and cash equivalents was $848 million and our borrowing capacity under our 2007 Credit Facility was $1.3 billion, reflecting outstanding borrowings of $700 million. Our
ability to maintain positive liquidity going forward depends on our ability to continue to generate cash from operations and have access to the financial markets, both of which are subject to general economic, financial, competitive, legislative,
regulatory and other market factors that are beyond our control.

Financial Risk Management

We are exposed to market risk from foreign currency exchange rates and interest rates, which could affect operating results, financial position and cash flows. We
manage our exposure to these market risks through our regular operating and financing activities and, when appropriate, through the use of derivative financial instruments. These derivative financial instruments are utilized to hedge economic
exposures as well as reduce earnings and cash flow volatility resulting from shifts in market rates. As permitted, certain of these derivative contracts have been designated for hedge accounting treatment under SFAS No. 133. Certain of our
derivatives do not qualify for hedge accounting but are effective as economic hedges of our inventory purchases and currency exposure. These derivative contracts are accounted for using the mark-to-market accounting method and accordingly are
exposed to some level of volatility. Under this method, the contracts are carried at their fair value on our Condensed Consolidated Balance Sheets within Other assets and Other liabilities. The level of volatility will vary with the type and amount
of derivative hedges outstanding, as well as fluctuations in the currency and interest rate market during the period. The related cash flow impacts of all of our derivative activities are reflected as cash flows from operating activities.

We enter into limited types of derivative contracts, including interest rate and cross currency interest rate swap agreements, foreign currency
spot, forward and swap contracts and net purchased foreign currency options to manage foreign currency exposures. Our primary foreign currency market exposures include the Japanese Yen, Euro, British Pound Sterling, Canadian Dollar and
Brazilian Real. The fair market values of all our derivative contracts change with fluctuations in interest rates and/or currency rates and are designed so that any changes in their values are offset by changes in the values of the underlying
exposures. Derivative financial instruments are held solely as risk management tools and not for trading or speculative purposes.

By their nature,
all derivative instruments involve, to varying degrees, elements of market and credit risk not recognized in our financial statements. The market risk associated with these instruments resulting from currency exchange and interest rate movements is
expected to offset the market risk of the underlying transactions, assets and liabilities being hedged. We do not believe there is a significant risk of loss in the event of non-performance by the counterparties associated with these instruments
because these transactions are executed with a diversified group of major financial institutions. Further, our policy is to deal with counterparties having a minimum investment-grade or better credit rating. Credit risk is managed through the
continuous monitoring of exposures to such counterparties.

Some of our derivative and other material contracts at September 30, 2007 may
require us to post cash collateral or maintain minimum cash balances in escrow. These cash amounts are reported in our Condensed Consolidated Balance Sheets within Other current assets or Other long-term assets, depending on when the cash will be
contractually released.

READERS NOTE: THIS CONCLUDES THE DISCUSSION EXCERPTED DIRECTLY FROM XEROX CORPORATIONS QUARTERLY REPORT ON
FORM 10-Q FOR THE QUARTER ENDED SEPTEMBER 30, 2007.



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##### Table of Contents

Item 4T. Controls and Procedures



|(a) | Evaluation of Disclosure Controls and Procedures
|--- | ------------------------------------------------

The Companys management evaluated, with the participation of our principal executive officer and principal financial officer, or persons performing similar functions, the effectiveness of our disclosure controls and
procedures, as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as of the end of the period covered by this report. Based on this evaluation, our principal executive officer and principal financial officer have
concluded that, as of the end of the period covered by this report, our disclosure controls and procedures were effective to ensure that information we are required to disclose in the reports that we file or submit under the Securities Exchange Act
of 1934, as amended, is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commissions rules and forms relating to Xerox Credit Corporation, and was accumulated and communicated to the
Companys management, including the principal executive officer and principal financial officer, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure.



|(b) | Changes in Internal Controls
|--- | ----------------------------

In
connection with the evaluation required by paragraph (d) of Rule 13a-15 under the Exchange Act, there was no change identified in our internal control over financial reporting that occurred during the last fiscal quarter that has materially
affected, or is reasonably likely to materially affect, our internal control over financial reporting.



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##### Table of Contents

PART IIOTHER INFORMATION

Item 1. Legal Proceedings

None.

Item 1A. Risk Factors

Our liquidity is dependent on the liquidity of XC, as our sole monetary asset is
the Master Demand Note.

As of September 30, 2007, our sole monetary asset is the Master Demand Note from Xerox
Corporation. As a result, our liquidity is dependent upon the liquidity of XC. Accordingly, certain disclosures contained herein relate to events and transactions that affect the liquidity of Xerox.

Xerox Corporations operating results and liquidity have improved over the last several years which further mitigate realizability risk of our
Master Demand Note. Specifically, Xerox Corporations net income was $1.21 billion, $978 million and $859 million for the years ended December 31, 2006, 2005 and 2004, respectively. Operating cash flows of Xerox Corporation were $1.62
billion, $1.42 billion and $1.75 billion for the years ended December 31, 2006, 2005 and 2004, respectively. In addition, Xerox Corporations credit ratings were upgraded to investment grade by Moodys and Fitch during 2006 and by
Standard & Poors during 2007.

Xeroxs liquidity is a function of its ability to successfully generate cash flow from a
combination of efficient operations and improvement therein, access to capital markets, securitizations, funding from third parties and borrowings secured by Xeroxs finance receivables portfolios. As of September 30, 2007, Xeroxs
total cash and cash equivalents was $848 million, and its borrowing capacity under its 2007 Credit Facility was approximately $1.3 billion, reflecting outstanding borrowings of $700 million. Xerox also has funding available through various secured
borrowing arrangements. Xerox believes its liquidity (including operating and other cash flows that it expects to generate) will be sufficient to meet operating requirements as they occur; however, Xeroxs ability to maintain sufficient
liquidity going forward depends on its ability to generate cash from operations and access to the capital markets, secured borrowings, securitizations and funding from third parties, all of which are subject to general economic, financial,
competitive, legislative, regulatory and other market factors that are beyond its control.



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##### Table of Contents

Item 6. Exhibits



| | Exhibit 3      (a) | Articles of Incorporation of Registrant filed with the Secretary of State of Delaware on September 23, 1980, as amended by Certificates of Amendment thereto filed
with the Secretary of State of Delaware on September 12, 1980 and September 19, 1988, as further amended by Certificate of Change of Registered Agent filed with the Secretary of State of Delaware on October 7, 1986, Certificate of
Ownership and Merger filed with the Secretary of State of Delaware on April 30, 1992 and Certificate of Correction of Certificate of Ownership and Merger filed with the Secretary of State of Delaware on March 3, 1994.
| | ------------------ | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Incorporated by reference to Exhibit 3(a) to Registrants Annual Report on Form 10-K for the Year Ended
December 31, 2004.



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

Incorporated by reference to Exhibit 3(b) to Registrants Quarterly Report on Form 10-Q for the Quarter Ended June 30, 2006.



| | Exhibit 31    (a) | Certification of CEO Pursuant to Rule 13a-14(a) or Rule 15d-14(a).
| | ----------------- | ------------------------------------------------------------------



| | (b) | Certification of CFO Pursuant to Rule 13a-14(a) or Rule 15d-14(a).
| | --- | ------------------------------------------------------------------



| | Exhibit 32 | Certification of CEO and CFO Pursuant to 18 U.S.C. Section 1350, as adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
| | ---------- | --------------------------------------------------------------------------------------------------------------------------------------



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##### Table of Contents

SIGNATURES

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 (Registrant)
|                       |  |                                      
|Date: November 2, 2007 |  | BY:                                   |  | /s/ John F. Rivera                                                  
|                       |  |                                       |  | John F. Rivera Vice President, Treasurer
and Chief Financial Officer



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##### Table of Contents

Exhibits



|Exhibit 3      (a) | Articles of Incorporation of Registrant filed with the Secretary of State of Delaware on September 23, 1980, as amended by Certificates of Amendment thereto filed
with the Secretary of State of Delaware on September 12, 1980 and September 19, 1988, as further amended by Certificate of Change of Registered Agent filed with the Secretary of State of Delaware on October 7, 1986, Certificate of
Ownership and Merger filed with the Secretary of State of Delaware on April 30, 1992 and Certificate of Correction of Certificate of Ownership and Merger filed with the Secretary of State of Delaware on March 3, 1994.
|------------------ | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Incorporated by reference to Exhibit 3(a) to Registrants Annual Report on Form 10-K for the Year Ended
December 31, 2004.



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

Incorporated by reference to Exhibit 3(b) to Registrants Quarterly Report on Form 10-Q for the Quarter Ended June 30, 2006.



|Exhibit 31    (a) | Certification of CEO Pursuant to Rule13a-14(a) or Rule15d-14(a).
|----------------- | ----------------------------------------------------------------



| | (b) | Certification of CFO Pursuant to Rule13a-14(a) or Rule15d-14(a).
| | --- | ----------------------------------------------------------------



|Exhibit 32 | Certification of CEO and CFO Pursuant to 18 U.S.C. Section 1350, as adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
|---------- | --------------------------------------------------------------------------------------------------------------------------------------



17