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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, 2008

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: 001-08133





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)





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, a non-accelerated filer or a smaller reporting company. See the
definitions of large accelerated filer, accelerated filer and smaller reporting company in Rule 12b-2 of the Exchange Act.

Large accelerated filer   ̈        Accelerated filer   ̈        Non-accelerated filer  x        Smaller reporting company   ̈

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 September 30, 2008
|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 2007 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, 2008

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 
|                               |  |                                                                                      
|                               |  | Financial Risk Management                                                             |  | 8 
|                               |  |                                                                                      
|                               |  | Capital Resources and Liquidity  Xerox Corporation                                   |  | 9 
|                               |  |                                                                                      
|Item 4T.                       |  | Controls and Procedures                                                               |  | 13
|                               | 
|Part II  OTHER INFORMATION    |  |                                                                                      
|                               |  |                                                                                      
|Item 1A.                       |  | Risk Factors                                                                          |  | 14
|                               |  |                                                                                      
|Item 6.                        |  | Exhibits                                                                              |  | 15
|                               | 
|Signatures                     |  | 16                                                                                   
|                               | 
|Exhibit Index                  |  | 17                                                                                   



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PART IFINANCIAL INFORMATION

Item 
1

XEROX CREDIT CORPORATION

CONDENSED BALANCE SHEETS (UNAUDITED)

(in millions, except share data)



|                                                                            |  |                   |       |                  |   |      
|--------------------------------------------------------------------------- |  | ----------------- | ----- | ---------------- | - | -----
|                                                                            |  | September 30,2008 |       | December 31,2007
|ASSETS                                                                      |  |                   |       |                  |   |      
|Assets:                                                                     |  |                   |       |                  |   |      
|Note receivable - Xerox Corporation                                         |  | $                 | 1,083 |                  | $ | 1,157
|Other assets                                                                |  |                   | 2     |                  |   | 3    
|                                                                            |  |                   |       |                  |   |      
|Total Assets                                                                |  | $                 | 1,085 |                  | $ | 1,160
|                                                                            |  |                   |       |                  |   |      
|                                                                            |  |                  
|LIABILITIES AND SHAREHOLDERS EQUITY                                        |  |                   |       |                  |   |      
|Liabilities:                                                                |  |                   |       |                  |   |      
|Notes payable after one year                                                |  |                   | 60    |                  |   | 160  
|Due to Xerox Corporation, net                                               |  |                   | 6     |                  |   | 2    
|Other liabilities                                                           |  |                   |      |                  |   | 2    
|                                                                            |  |                   |       |                  |   |      
|Total Liabilities                                                           |  |                   | 66    |                  |   | 164  
|                                                                            |  |                   |       |                  |   |      
|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                                                           |  |                   | 777   |                  |   | 754  
|                                                                            |  |                   |       |                  |   |      
|Total Shareholders Equity                                                  |  |                   | 1,019 |                  |   | 996  
|                                                                            |  |                   |       |                  |   |      
|Total Liabilities and Shareholders Equity                                  |  | $                 | 1,085 |                  | $ | 1,160
|                                                                            |  |                   |       |                  |   |      

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 EndedSeptember 30, |    | Nine Months EndedSeptember 30,
|                                         |  | 2008                            |    | 2007                           |   | 2008 |  | 2007
|Earned Income from Xerox note receivable |  | $                               | 15 |                                | $ | 20   |  | $    | 45 |  | $ | 70
|                                         |  |                                 |    |                                |   |      |  |      |    |  |   |   
|Expenses:                                |  |                                 |    |                                |   |      |  |      |    |  |   |   
|Interest                                 |  |                                 | 3  |                                |   | 3    |  |      | 8  |  |   | 17
|Loss on derivative instruments, net      |  |                                 |   |                                |   |     |  |      |   |  |   | 1 
|General and administrative               |  |                                 |   |                                |   |     |  |      | 1  |  |   | 1 
|                                         |  |                                 |    |                                |   |      |  |      |    |  |   |   
|Total Expenses                           |  |                                 | 3  |                                |   | 3    |  |      | 9  |  |   | 19
|                                         |  |                                 |    |                                |   |      |  |      |    |  |   |   
|Income before income taxes               |  |                                 | 12 |                                |   | 17   |  |      | 36 |  |   | 51
|Provision for income taxes               |  |                                 | 4  |                                |   | 6    |  |      | 13 |  |   | 19
|                                         |  |                                 |    |                                |   |      |  |      |    |  |   |   
|Net Income                               |  | $                               | 8  |                                | $ | 11   |  | $    | 23 |  | $ | 32
|                                         |  |                                 |    |                                |   |      |  |      |    |  |   |   

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 EndedSeptember 30, |     
|                                                                                  |  | 2008                           |      |   | 2007 |  
|Cash Flows from Operating Activities                                              |  |                                |      |   |      |   |      |  
|Net income                                                                        |  | $                              | 23   |   |      | $ | 32   |  
|Adjustments to reconcile net income to net cash provided by operating activities: |  |                                |      |   |      |   |      |  
|Loss on derivative instruments, net                                               |  |                                |     |   |      |   | 1    |  
|Net change in other assets and other liabilities                                  |  |                                | 3    |   |      |   | (5   | )
|                                                                                  |  |                                |      |   |      |   |      |  
|Net cash provided by operating activities                                         |  |                                | 26   |   |      |   | 28   |  
|                                                                                  |  |                                |      |   |      |   |      |  
|Cash Flows from Investing Activities                                              |  |                                |      |   |      |   |      |  
|Net repayments of loans from Xerox Corporation                                    |  |                                | 74   |   |      |   | 297  |  
|                                                                                  |  |                                |      |   |      |   |      |  
|Net cash provided by investing activities                                         |  |                                | 74   |   |      |   | 297  |  
|                                                                                  |  |                                |      |   |      |   |      |  
|Cash Flows from Financing Activities                                              |  |                                |      |   |      |   |      |  
|Cash payments on debt                                                             |  |                                | (100 | ) |      |   | (296 | )
|Settlement of derivative instruments                                              |  |                                |     |   |      |   | (29  | )
|                                                                                  |  |                                |      |   |      |   |      |  
|Net cash used in financing activities                                             |  |                                | (100 | ) |      |   | (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)

Note 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 2007 Annual Report on Form 10-K (2007 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 2007 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. Our financial statements reflect an allocation of general
and administrative expenses for those costs incurred by XC on our behalf. By their nature, transactions involving related parties cannot be presumed to be carried out on the same basis as transactions among wholly-unrelated parties.

Note 2Recent Accounting Pronouncements

We adopted the
provisions of SFAS No. 157, Fair Value Measurements (FAS 157) on January 1, 2008. FAS 157 defines fair value, establishes a market-based framework or hierarchy for measuring fair value, and expands disclosures about
fair value measurements. FAS 157 is applicable whenever another accounting pronouncement requires or permits assets and liabilities to be measured at fair value. In February 2008, the FASB decided that an entity need not apply this standard to
nonfinancial assets and liabilities that are recognized or disclosed at fair value in the financial statements on a nonrecurring basis until the subsequent year. Accordingly, our adoption of this standard was limited to financial assets and
liabilities. We also adopted SFAS No. 159, The Fair Value Option for Financial Assets and Financial Liabilities  Including an Amendment of FASB Statement No. 115 (FAS 159) on January 1, 2008. FAS 159
permits entities to choose to measure many financial instruments and certain other items at fair value. The adoption of these standards did not have an effect on our financial condition or results of operations nor are they expected to have a
material impact on future periods due to the limited nature of our assets and liabilities.

Note 3Due to/from Xerox

Demand loans to XC totaled $1,083 and the interest rate in effect at September 30, 2008 was 5.13%.

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 $6 and $2 as of September 30, 2008 and December 31, 2007. These amounts are reported in our Condensed Balance Sheets as Due to Xerox Corporation, net.

Note 4Debt

The Company redeemed $100 Medium Term Notes in the third quarter of 2008 as follows:



|                  |  |                    |  |        |  |  |  | 
|----------------- |  | ------------------ |  | ------ |  |  |  | 
|Original Maturity |  | Date of Redemption |  | Amount |  |  |  | 
|2018              |  | July 2008          |  | $ 25   |  |  |  | 
|2012              |  | July 2008          |  | 25     |  |  |  | 
|2013              |  | July 2008          |  | 25     |  |  |  | 
|2013              |  | August 2008        |  | 25     |  |  |  | 
|                  |  |                    |  |        |  |  |  | 
|                  |  |                    |  | $100   |  |  |  | 
|                  |  |                    |  |        |  |  |  | 

A related charge of $1, primarily representing remaining deferred costs, was recorded in interest expense in the
third quarter 2008 related to the redemption.



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Item 2.

XEROX CREDIT CORPORATION

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, 2008. 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

Earned income from the Master Demand Note, which represents a demand loan for accumulated cash transfers to XC, was $15 million and $20 million for the third quarters of 2008 and 2007, respectively, and $45 million
and $70 million for the nine months ended September 30, 2008 and 2007, respectively. The decrease primarily relates to lower interest rates in 2008 as compared to 2007. The decrease also reflects a lower average note balance in 2008 due to
current and prior year repayments by XC under the Master Demand Note that were primarily used to repay third-party debt in this quarter as well as the second quarter of 2007.

Interest expense was $3 million for the third quarters of 2008 and 2007, and $8 and $17 million for the nine months ended September 30, 2008 and 2007, respectively. The third quarter 2008 was unchanged from the
prior year quarter, as a $1 million charge for deferred costs associated with the redemption, was offset by lower interest expense resulting from lower debt levels due to such redemption which occurred early in the quarter. The decrease in the nine
months ended September 2008 relates primarily to lower debt levels resulting from the repayment of $296 million in the first six months of 2007 and the early redemption of $100 million in the third quarter of 2008.

The effective income tax rate was 37.3% and 37.4% for the third quarters of 2008 and 2007, respectively, and 37.3% and 37.4% for the nine months ended September 30,
2008 and 2007, respectively, reflecting the U.S. federal statutory rate of 35.0% and net state income taxes.

Capital Resources and Liquidity

Net cash provided by operating activities was $26 million and $28 million for the
nine months ended September 30, 2008 and 2007, respectively. The decrease primarily reflects lower net income, as partially offset by changes in working capital.

Net cash provided by investing activities was $74 million and $297 million for the nine months ended September 30, 2008 and 2007, respectively. Cash provided by investing activities in 2008 consisted of $100
million increase from our collections on the demand note used to repay debt, offset by a reduction of $26 million of net advances to Xerox (the net advances consisted of additional loans to Xerox of $45 million from interest on the Master Demand
Note, net of $19 million of collections primarily for the payment of taxes and interest). Cash provided by investing activities of $297 million in 2007 consisted of collections on the Master Demand Note of $325 million used to repay debt and to
settle an intercompany derivative, partially offset by a reduction of $28 million of net advances to Xerox.

Net cash used in financing activities was $100
million and $325 million for the nine months ended September 30, 2008 and 2007, respectively. Net cash used in financing activities in 2008 reflects the early redemption of a portion of our Medium Term Notes. Net cash used in 2007 reflects the
$246 million Yen denominated debt repayment, settlement of the $29 million intercompany derivative hedging the Yen debt and $50 million repayment of third party debt.

As of September 30, 2008, we had $60 million of debt outstanding. We believe that the amounts due under the Master Demand Note from XC of $1.1 billion at September 30, 2008 will be sufficient to meet our
remaining obligations as they are redeemed or 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, 2008. 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 CONDENSED CONSOLIDATED FINANCIAL STATEMENTS, WHICH ARE INCLUDED IN XEROX CORPORATIONS QUARTERLY REPORT ON FORM 10-Q FOR THE QUARTER
ENDED SEPTEMBER 30, 2008 FILED SEPARATELY WITH THE SEC.

Capital Resources and Liquidity

The following table summarizes our cash and cash equivalents for the nine months ended September 30, 2008 and 2007:



|                                                             |  |                                |       |   |      |   |        |        |  |   |      |  
|------------------------------------------------------------ |  | ------------------------------ | ----- | - | ---- | - | ------ | ------ |  | - | ---- | -
|                                                             |  | Nine MonthsEnded September 30, |      
|(in millions)                                                |  | 2008                           |       |   | 2007 |   |        | Change | 
|Net cash provided by operating activities                    |  | $                              | 754   |   |      | $ | 861    |        |  | $ | (107 | )
|Net cash used in investing activities                        |  |                                | (706  | ) |      |   | (1,619 | )      |  |   | 913  |  
|Net cash (used in) provided by financing activities          |  |                                | (251  | ) |      |   | 161    |        |  |   | (412 | )
|Effect of exchange rate changes on cash and cash equivalents |  |                                | (23   | ) |      |   | 46     |        |  |   | (69  | )
|                                                             |  |                                |       |   |      |   |        |        |  |   |      |  
|Decrease in cash and cash equivalents                        |  |                                | (226  | ) |      |   | (551   | )      |  |   | 325  |  
|Cash and cash equivalents at beginning of period             |  |                                | 1,099 |   |      |   | 1,399  |        |  |   | (300 | )
|                                                             |  |                                |       |   |      |   |        |        |  |   |      |  
|Cash and cash equivalents at end of period                   |  | $                              | 873   |   |      | $ | 848    |        |  | $ | 25   |  
|                                                             |  |                                |       |   |      |   |        |        |  |   |      |  

Cash Flows from Operating Activities

Net cash provided by operating activities was $754 million for the nine months ended September 30, 2008. The $107 million decrease in cash from the nine months ended September 30, 2007 was primarily due to
the following:



| |  | $121 million decrease in pretax income before restructuring and provision for litigation.
|- |  | -----------------------------------------------------------------------------------------



| |  | $126 million decrease primarily due to lower accounts payable related to the timing of payments and purchases.
|- |  | --------------------------------------------------------------------------------------------------------------



| |  | $75 million decrease associated with changes in benefits and other accruals.
|- |  | ----------------------------------------------------------------------------



| |  | $53 million decrease due to higher net income tax payments, primarily resulting from the absence of prior year tax refunds.
|- |  | ---------------------------------------------------------------------------------------------------------------------------



| |  | $103 million increase due to lower restructuring payments resulting from a lower level of restructuring activity during the preceding twelve months.
|- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------



| |  | $99 million increase due to improved collection performance of trade receivables.
|- |  | ---------------------------------------------------------------------------------



| |  | $49 million increase due to higher net run-off of finance receivables from lower originations reflecting changes in channel mix.
|- |  | --------------------------------------------------------------------------------------------------------------------------------

Cash Flows from Investing Activities

Net cash used in
investing activities was $706 million for the nine months ended September 30, 2008. The $913 million increase in cash from the nine months ended September 30, 2007 was primarily due to the following:



| |  | $1,421 million increase due to less cash used for acquisitions in 2008. Current year acquisitions included $149 million for Veenman B.V., Saxon Business Systems and
Sierra Office Solutions, as compared to $1,557 million for GIS and its additional acquisitions in the prior year comparable period.
|- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  | $455 million decrease due to higher escrow and other restricted investments, primarily resulting from funding of the escrow account for the previously disclosed
Carlson litigation settlement.
|- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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Cash Flows from Financing Activities

Net cash used in financing activities was $251 million for the nine months ended September 30, 2008. The $412 million decrease in cash from the nine months ended September 30, 2007 was primarily due to the
following:



| |  | $955 million decrease from lower net cash proceeds from unsecured debt. 2008 reflects the issuance of $1.4 billion in Senior Notes, $250 million from a private
placement borrowing and net payments of $352 million on the Credit Facility, as well as net payments of $398 million on other debt. 2007 reflects the issuance of $1.1 billion Senior Notes, $400 million from private placement borrowings and net
proceeds of $700 million on the Credit Facility, offset by net payments of $341 million on other debt.
|- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  | $303 million decrease due to additional purchases under our share repurchase program.
|- |  | -------------------------------------------------------------------------------------



| |  | $116 million decrease due to common stock dividend payments.
|- |  | ------------------------------------------------------------



| |  | $72 million decrease due to lower proceeds from the issuance of common stock, reflecting a decrease in stock option exercises as well as lower related tax benefits.
|- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  | $33 million decrease due to share repurchases related to employee withholding taxes on stock-based compensation vesting.
|- |  | ------------------------------------------------------------------------------------------------------------------------



| |  | $1,063 million increase from lower net repayments on secured debt. 2007 reflects termination of our secured financing program with GE in the United Kingdom for $593
million and the repayment of secured borrowings to DLL for $153 million. The remainder reflects lower payments associated with the continued run-off of our secured borrowing program.
|- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Customer Financing Activities

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



|                                   |  |                   |       |                  |   |      
|---------------------------------- |  | ----------------- | ----- | ---------------- | - | -----
|(in millions)                      |  | September 30,2008 |       | December 31,2007
|Total Finance receivables, net(1)  |  | $                 | 7,484 |                  | $ | 8,048
|Equipment on operating leases, net |  |                   | 604   |                  |   | 587  
|                                   |  |                   |       |                  |   |      
|Total Finance Assets, net          |  | $                 | 8,088 |                  | $ | 8,635
|                                   |  |                   |       |                  |   |      



|(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.
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Accounts Receivable Sales Arrangement

During the third quarter 2008 we sold $146 million of accounts receivables, as compared to
$168 million in the second quarter 2008, under an existing accounts receivables sales arrangement in Europe. $136 million of receivables sold to date under this arrangement remained uncollected by the third party as of September 30, 2008.

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.

We are
currently rated investment grade by all major rating agencies. As of September 30, 2008, the ratings were as follows:



|                         |  |                      |  |         
|------------------------ |  | -------------------- |  | --------
|                         |  | Senior UnsecuredDebt |  | Outlook 
|                         |  |                     
|Moodys                  |  | Baa2                 |  | Positive
|                         |  |                     
|Standard & Poors (S&P) |  | BBB                  |  | Stable  



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|      |  |                      |  |        
|----- |  | -------------------- |  | -------
|      |  | Senior UnsecuredDebt |  | Outlook
|      |  |                     
|Fitch |  | BBB                  |  | Stable 

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. The following is a discussion of our liquidity position as of September 30,
2008:



| |  | As of September 30, 2008, total cash and cash equivalents was $873 million and our borrowing capacity under our Credit Facility was $1.752 billion, reflecting
$248 million outstanding borrowings and no outstanding letters of credit. In addition we currently have approximately $750 million available under a secured borrowing agreement through 2010, which has not been accessed in almost three years.
|- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  | We have consistently delivered strong cash flow from operations over the past three years on the strength of our annuity based revenue model. Cash flows from
operations were $1.9 billion, $1.6 billion and $1.4 billion for the years ended December 31, 2007, 2006 and 2005, respectively. Cash flows from operations are expected to be approximately $1.1 billion in 2008 including expected payments for our
securities litigation.
|- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  | Our debt maturities are in line with historical and projected cash flows and are spread over the next ten years as follows (in millions):
|- |  | -----------------------------------------------------------------------------------------------------------------------------------------



|                    |  |        |      
|------------------- |  | ------ | -----
|Year                |  | Amount
|Q4 2008             |  | $      | 59   
|2009(1)             |  |        | 1,578
|2010(2)             |  |        | 992  
|2011                |  |        | 809  
|2012                |  |        | 1,166
|2013                |  |        | 1,134
|2014                |  |        | 69   
|2015                |  |        |     
|2016                |  |        | 956  
|2017                |  |        | 498  
|2018 and thereafter |  |        | 1,028



|(1) | Includes $448 million put under private placement (final maturity 2022) ($427 million at 9/30/08).
|--- | --------------------------------------------------------------------------------------------------

|(2) | Includes $278 million put under private placement (final maturity 2023) ($250 million at 9/30/08).
|--- | --------------------------------------------------------------------------------------------------



| |  | 2008 debt issuances included $1.4 billion in Senior Notes and $250 million from a private placement borrowing.
|- |  | --------------------------------------------------------------------------------------------------------------

Although we believe we are well positioned from a liquidity standpoint, 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.

In October 2008, the Credit Facility was amended. See Note 15  Subsequent Event for additional information.

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



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##### Table of Contents

currency exposure. These derivative contracts are accounted for at fair value 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 markets during the period. The related cash flow impact 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. 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.

The recent market events have not required us to materially modify or change our financial risk management strategies with respect to our exposures to interest rate and foreign currency risk.

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,
2008.



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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 1A. | Risk Factors
|-------- | ------------

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

As of September 30, 2008, 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s operating results and liquidity have improved over the last several years which further mitigate realizability risk of our Master Demand Note. Specifically,
Xeroxs net income was $1.14 billion, $1.21 billion and $978 million for the years ended December 31, 2007, 2006 and 2005, respectively. Operating cash flows of Xerox were $1.87 billion, $1.62 billion and $1.42 billion for the years ended
December 31, 2007, 2006 and 2005, respectively. In addition, XC is rated investment grade by all the major rating agencies.

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, 2008, Xeroxs total cash and cash equivalents was $873 million, and its borrowing capacity under its 2007 Credit Facility was approximately $1.75 billion, reflecting outstanding borrowings of
$248 million. Xerox also has funding available through a secured borrowing arrangement with General Electric Capital Corporation. 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.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|           |  |    
|Exhibit 3  |  | (b) |  | By-Laws of Registrant, as amended and restated 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).                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|           |  |    
|Exhibit 31 |  | (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: October 30, 2008 |  | BY:                                   |  | /s/ John F. Rivera                                                  
|                       |  |                                       |  | John F. Rivera Vice President, Treasurer and Chief
Financial Officer



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##### Table of Contents

Exhibit Index



|           |  |     |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|---------- |  | --- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|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.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|           |  |    
|Exhibit 3  |  | (b) |  | By-Laws of Registrant, as amended and restated 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).                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|           |  |    
|Exhibit 31 |  | (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