UNITEDSTATES
SECURITIESANDEXCHANGECOMMISSION
Washington,D.C.20549

FORM N-Q

QUARTERLY SCHEDULE OF PORTFOLIO HOLDINGS OF REGISTERED
MANAGEMENT INVESTMENT COMPANY

Investment Company Act file number 811-21280

Name of Fund: BlackRock Credit Allocation Income Trust III (BPP)

Fund Address: 100 Bellevue Parkway, Wilmington, DE 19809

Name and address of agent for service: Anne F. Ackerley, Chief Executive Officer, BlackRock
Credit Allocation Income Trust III, 55 East 52 nd Street, New York, NY 10055.

Registrant’s telephone number, including area code: (800) 882-0052, Option 4

Date of fiscal year end: 10/31/2010

Date of reporting period: 01/31/2010

Item 1 – Schedule of Investments

Schedule of Investments January 31, 2010 (Unaudited)

BlackRock Credit Allocation Income Trust III (BPP)
(Percentages shown are based on Net Assets)

Common Stocks   Shares   Value  
Specialty Retail — 0.0%      
Lazy Days Reorganization Common      
    Stock (a)   8,575 $   33,444  
Total Common Stocks – 0.0%                                                       33,444
  Par    
Corporate Bonds   (000)    
Commercial Banks — 0.5%      
RESPARCS Funding LP I,      
    8.00% (a)(b)(c)   $ 4,000   970,000  
Communications Equipment — 0.7%      
Brocade Communications Systems,      
    Inc., 6.88%, 1/15/20 (d)   1,450   1,479,000  
Consumer Finance — 0.9%      
Capital One Bank USA NA,      
    8.80%, 7/15/19   1,625   1,970,589  
Containers & Packaging — 0.1%      
Impress Holdings BV, 3.38%,      
    9/15/13 (d)(e)   240   228,600  
Diversified Financial Services — 1.8%      
Bank of America Corp.,      
    7.63%, 6/01/19   3,325   3,804,239  
Diversified Telecommunication Services — 0.4%    
Qwest Corp., 8.38%, 5/01/16   810   886,950  
Food Products — 0.8%      
Kraft Foods, Inc., 6.50%, 8/11/17   800   885,230  
Kraft Foods, Inc., 6.13%, 8/23/18   800   859,694  
    1,744,924  
Health Care Providers & Services — 1.9%      
Aetna, Inc., 6.75%, 12/15/37   1,725   1,937,956  
UnitedHealth Group, Inc., 6.88%,      
    2/15/38   1,725   1,926,011  
    3,863,967  
Hotels, Restaurants & Leisure — 0.5%      
Greektown Holdings, LLC, 10.75%,      
    12/01/13 (b)(c)(d)   362   43,440  
Icahn Enterprises LP, 8.00%,      
    1/15/18 (d)   1,000   960,000  
    1,003,440  
Insurance — 7.1%      
Kingsway America, Inc.,      
    7.50%, 2/01/14   9,000   6,772,500  
Lincoln National Corp.,      
    8.75%, 7/01/19   850   1,032,979  
Lincoln National Corp.,      
    6.25%, 2/15/20   1,725   1,781,399  
Prudential Financial, Inc.,      
    6.63%, 12/01/37   1,725   1,859,985  
QBE Insurance Group Ltd., 9.75%,      
    3/14/14 (d)   2,975   3,398,357  
    14,845,220  

      Par    
Corporate Bonds     (000)   Value  
Machinery — 1.2%        
AGY Holding Corp., 11.00%,        
    11/15/14   $ 460   $ 368,000  
Ingersoll-Rand Global Holding Co.        
    Ltd., 9.50%, 4/15/14     1,725   2,109,965  
      2,477,965  
Media — 4.6%        
CMP Susquehanna Corp., 3.20%,        
    5/15/14 (d)     9   180  
COX Communications, Inc., 8.38%,        
    3/01/39 (d)     1,725   2,182,870  
Comcast Corp., 6.30%, 11/15/17     1,725   1,906,698  
Comcast Holdings Corp., 6.30%,        
    11/15/29 (f)     110   3,332,853  
Local Insight Regatta Holdings, Inc.,        
    11.00%, 12/01/17     700   455,000  
UPC Germany GmbH, 8.13%,        
    12/01/17 (d)     505   510,050  
Virgin Media Secured Finance Plc,        
    6.50%, 1/15/18 (d)     1,300   1,278,875  
      9,666,526  
Oil, Gas & Consumable Fuels — 1.1%        
EXCO Resources, Inc., 7.25%,        
    1/15/11     40   40,000  
ONEOK Partners LP, 8.63%,        
    3/01/19     1,725   2,153,928  
      2,193,928  
Paper & Forest Products — 2.7%        
Georgia-Pacific LLC, 8.25%,        
    5/01/16 (d)     835   893,450  
International Paper Co., 7.50%,        
    8/15/21     1,625   1,844,643  
International Paper Co., 8.70%,        
    6/15/38     900   1,120,325  
International Paper Co., 7.30%,        
    11/15/39     1,725   1,860,017  
      5,718,435  
Professional Services — 0.1%        
FTI Consulting, Inc., 7.75%,        
    10/01/16     100   101,500  
Real Estate Investment Trusts (REITs) — 1.9%      
AvalonBay Communities, Inc.,        
    6.10%, 3/15/20     1,725   1,828,750  
ERP Operating LP, 5.38%, 8/01/16     440   456,871  
ERP Operating LP, 5.75%, 6/15/17     1,715   1,775,798  
      4,061,419  
Tobacco — 2.0%        
Altria Group, Inc., 9.70%, 11/10/18     1,725   2,160,402  
Altria Group, Inc., 9.25%, 8/06/19     1,600   1,970,023  
      4,130,425  
Wireless Telecommunication Services — 0.5%      
Cricket Communications, Inc.,        
    7.75%, 5/15/16     325   327,031  

BlackRock Credit Allocation Income Trust III January 31, 2010 1

Schedule of Investments (continued)

BlackRock Credit Allocation Income Trust III (BPP)
(Percentages shown are based on Net Assets)

            Par    
Corporate Bonds   (000)   Value  
Wireless Telecommunication Services      
(concluded)      
Nextel Communications, Inc.,      
    Series E, 6.88%, 10/31/13   $ 805 $   750,663  
    1,077,694  
Total Corporate Bonds – 28.8%                                           60,224,821
Investment Companies   Shares    
UltraShort Real Estate ProShares   60,000   495,000  
Total Investment Companies – 0.2%     495,000  
Preferred Securities      
            Par    
Capital Trusts   (000)    
Building Products — 0.3%      
C8 Capital SPV Ltd., 6.64% (b)(d)(e)   $ 970   686,799  
Capital Markets — 3.8%      
State Street Capital Trust III,      
    8.25% (b)(e)   1,385   1,417,271  
State Street Capital Trust IV, 1.25%,      
    6/01/67 (e)   9,675   6,629,571  
    8,046,842  
Commercial Banks — 11.4%      
Bank of Ireland Capital Funding II,      
    LP, 5.57% (b)(d)(e)   854   486,780  
Bank of Ireland Capital Funding III,      
    LP, 6.11% (b)(d)(e)   1,471   838,470  
Barclays Bank Plc, 5.93% (b)(d)(e)   890   745,375  
CBA Capital Trust I, 5.81% (b)(d)   5,000   4,773,400  
FCB/NC Capital Trust I, 8.05%,      
    3/01/28   1,100   963,413  
Lloyds TSB Bank Plc, 6.90% (b)   4,399   3,618,177  
Mizuho Capital Investment 1 Ltd.,      
    6.69%, 12/31/49 (d)(e)   5,000   4,259,765  
NBP Capital Trust III, 7.38% (b)   2,000   1,475,000  
National City Preferred Capital Trust      
    I, 12.00% (b)(e)   600   682,956  
SunTrust Preferred Capital I,      
    5.85% (b)(e)   303   207,555  
USB Capital XIII Trust, 6.63%,      
    12/15/39   1,725   1,708,199  
Wells Fargo Capital XIII, Series      
    GMTN, 7.70%, 12/29/49 (b)(e)   1,700   1,649,000  
Westpac Capital Trust IV,      
    5.26% (b)(d)(e)   3,000   2,491,050  
    23,899,140  
Diversified Financial Services — 4.5%      
JPMorgan Chase Capital XXI,      
    Series U, 1.20%, 1/15/87 (e)   7,125   4,974,646  

          Par    
Capital Trust       (000)   Value  
Diversified Financial Services (concluded)      
JPMorgan Chase Capital XXIII,        
    1.25%, 5/15/77 (e)   $ 6,190   $ 4,334,888  
      9,309,534  
Electric Utilities — 0.4%        
PPL Capital Funding, 6.70%,        
    3/30/67 (e)     900   787,500  
Insurance — 7.5%        
AXA SA, 6.38% (b)(d)(e)     900   730,125  
The Allstate Corp., 6.50%,        
    5/15/67 (e)     900   841,500  
Chubb Corp., 6.38%, 3/29/67 (e)     900   864,000  
Genworth Financial, Inc., 6.15%,        
    11/15/66 (e)     1,475   1,039,875  
Liberty Mutual Group, Inc., 10.75%,        
    6/15/88 (d)(e)     900   990,000  
Lincoln National Corp., 7.00%,        
    5/17/66 (e)     900   753,750  
MetLife, Inc., 6.40%, 12/15/66     900   792,000  
Nationwide Life Global Funding I,        
    6.75%, 5/15/67     900   724,281  
Progressive Corp., 6.70%,        
    6/15/67 (e)     900   828,000  
Reinsurance Group of America,        
    6.75%, 12/15/65 (e)     1,300   1,152,580  
The Travelers Cos., Inc., 6.25%,        
    3/15/67 (e)     900   846,321  
White Mountains Re Group Ltd.,        
    7.51% (b)(d)(e)     2,600   2,216,188  
ZFS Finance, 5.88%, 5/09/32 (d)(e)     190   162,319  
ZFS Finance, 6.50%, 5/09/67 (d)(e)     2,209   1,966,010  
Zenith National Insurance Capital        
    Trust I, 8.55%, 8/01/28 (d)     1,800   1,748,250  
      15,655,199  
Multi-Utilities — 0.4%        
Puget Sound Energy, Inc., Series A,        
    6.97%, 6/01/67 (e)     925   825,396  
Oil, Gas & Consumable Fuels — 0.4%        
TransCanada PipeLines Ltd., 6.35%,        
    5/15/67 (e)     900   854,222  
Total Capital Trusts – 28.7%       60,064,632  
Preferred Stocks     Shares    
Capital Markets — 0.0%        
Lehman Brothers Holdings Inc.,        
    Series D, 5.67% (a)(c)     31,100   6,220  
Commercial Banks — 9.0%        
Banesto Holdings, Ltd., Series A,        
    10.50% (d)     30,000   774,375  
Barclays Bank Plc, 8.13%     100,000   2,460,000  
First Republic Preferred Capital        
    Corp., 7.25%     98,852   2,070,949  
HSBC USA, Inc., Series H, 6.50%     330,000   8,085,000  

2 BlackRock Credit Allocation Income Trust III January 31, 2010

Schedule of Investments January 31, 2010 (Unaudited)

BlackRock Credit Allocation Income Trust III (BPP)
(Percentages shown are based on Net Assets)

Preferred Stocks   Shares   Value  
Commercial Banks (concluded)      
Royal Bank of Scotland Group Plc,      
    Series M, 6.40%         10,000 $   116,700  
Santander Finance Preferred SA      
    Unipersonal, 10.50%   38,500   1,085,700  
Santander Perpetual SA Unipersonal,      
    6.67% (d)(e)   625,000   592,646  
Union Planter Preferred Funding      
    Corp., 7.75%   60   3,538,125  
    18,723,495  
Diversified Financial Services — 1.8%      
JPMorgan Chase & Co., Series E,      
    6.15%   75,000   3,712,500  
Electric Utilities — 0.6%      
Alabama Power Co., 6.50%   50,000   1,290,000  
Insurance — 16.5%      
Arch Capital Group Ltd., Series A,      
    8.00%   117,414   2,929,479  
Aspen Insurance Holdings Ltd.,      
    7.40% (e)   115,000   2,553,000  
Endurance Specialty Holdings Ltd.,      
    Series A, 7.75%   172,400   4,032,436  
MetLife, Inc., Series B, 6.50%   314,500   7,510,260  
PartnerRe Ltd., Series C, 6.75%   209,400   5,006,754  
Prudential Plc, 6.50%   62,000   1,395,620  
Prudential Plc, 6.50% (b)   6,000,000   4,968,000  
RenaissanceRe Holdings Ltd.,      
    Series D, 6.60%   210,000   4,544,400  
Zurich RegCaPS Funding Trust II,      
    6.58% (d)   2,000   1,663,750  
    34,603,699  
Media — 0.0%      
CMP Susquemanna Radio Holdings      
    Corp. (a)(d)(e)   2,052   -  
Real Estate Investment Trusts (REITs) — 2.3%    
BRE Properties, Inc., Series D, 6.75%   20,000   444,200  
Public Storage, Series F, 6.45%   20,000   442,600  
Public Storage, Series M, 6.63%   35,000   798,700  
SunTrust Real Estate Investment      
    Trust, 9.00%   30   3,027,188  
    4,712,688  
Specialty Retail — 0.1%      
Lazy Days RV Center, Inc.   182   181,809  
Total Preferred Stocks – 30.3%                                       63,230,411
  Shares    
Trust Preferreds   (000)    
Capital Markets — 1.2%      
Structured Asset Trust Unit      
    Repackagings, 6.25%, 7/15/32   11   251,156  
Structured Asset Trust Unit      
    Repackagings, 6.00%, 2/15/33   103   2,213,077  
    2,464,233  

  Shares    
Trust Preferreds   (000)               Value  
Diversified Financial Services — 0.8%      
ING Groep NV, 7.20% (b)   70   $ 1,369,900  
PPLUS Trust Certificates, Series      
    VAL-1, Class A, 7.25%, 4/15/32   11   264,815  
    1,634,715  
Food Products — 1.1%      
Corporate-Backed Trust Certificates,      
    Kraft Foods, Inc. Debenture      
    Backed, Series 2003-11, 5.88%,      
    11/01/31   100   2,362,672  
Insurance — 1.1%      
Everest Re Capital Trust, 6.20%,      
    3/29/34   30   606,667  
Financial Security Assurance      
    Holdings Ltd., 5.60%, 7/15/03   15   219,395  
The Phoenix Cos., Inc., 7.45%,      
    1/15/32   79   1,425,917  
    2,251,979  
Media — 6.1%      
Comcast Corp., 7.00%, 9/15/55   50   1,251,320  
Comcast Corp., 6.63%, 5/15/56   470   11,341,100  
Corporate-Backed Trust Certificates,      
    News America Debenture Backed,      
    Series 2002-9, 8.13%, 12/01/45   7   178,309  
    12,770,729  
Oil, Gas & Consumable Fuels — 1.8%      
Nexen, Inc., 7.35%, 11/01/43   155   3,676,600  
Wireless Telecommunication Services — 0.8%    
Structured Repackaged Asset-      
    Backed Trust Securities, Sprint      
    Capital Corp. Debenture Backed,      
    Series 2004-2, 6.50%, 11/15/28   103   1,761,552  
Total Trust Preferreds – 12.9%     26,922,480  
Total Preferred Securities – 71.9%     150,217,523  
Warrants (g)   Shares    
Media — 0.0%      
CMP Susquemanna Radio Holdings      
    Corp. (expires 3/26/19) (d)   2,345   -  
Total Warrants – 0.0%     -  

BlackRock Credit Allocation Income Trust III January 31, 2010 3

Schedule of Investments (continued)

BlackRock Credit Allocation Income Trust III (BPP)
(Percentages shown are based on Net Assets)

Options Purchased   Contracts   Value  
Exchange-Traded Put Options — 0.0%      
10-Year U.S. Treasury Bond Future   85 $   13,281  
Total Options Purchased      
(Cost – $17,338) – 0.0%     13,281  
Total Long-Term Investments      
(Cost – $235,779,403) – 100.9%                                      210,984,069
Short-Term Securities   Shares    
BlackRock Liquidity Funds,      
TempFund, Institutional Class,      
    0.10% (h)(i)   68,668,495   68,668,495  
Total Short-Term Securities      
(Cost – $68,668,495) – 32.9%     68,668,495  
Total Investments      
(Cost – $304,447,898*) – 133.8%     279,652,564  
Liabilities in Excess of Other Assets – (0.1)%   (184,419)  
Preferred Shares, at Redemption Value – (33.7)%   (70,427,257)  
Net Assets Applicable to Common Shares – 100.0% $   209,040,888  

*   The cost and unrealized appreciation (depreciation) of investments as of  
  January 31, 2010, as computed for federal income tax purposes, were  
  as follows:    
  Aggregate cost   $ 305,985,443  
  Gross unrealized appreciation   $ 5,900,008  
  Gross unrealized depreciation   (32,232,887)  
  Net unrealized depreciation   $ (26,332,879)  

(a)   Non-income producing security.      
(b)   Security is perpetual in nature and has no stated maturity date.  
(c)   Issuer filed for bankruptcy and/or is in default of interest payments.  
(d)   Security exempt from registration under Rule 144A of the Securities  
  Act of 1933. These securities may be resold in transactions exempt  
  from registration to qualified institutional investors.    
(e)   Variable rate security. Rate shown is as of report date.    
(f)   Convertible security.        
(g)   Warrants entitle the Fund to purchase a predetermined number of  
  shares of common stock and are non-income producing. The purchase  
  price and number of shares are subject to adjustment under certain  
  conditions until the expiration date.      
(h)   Investments in companies considered to be an affiliate of the Fund, for  
  purposes of Section 2(a)(3) of the Investment Company Act of 1940,  
  were as follows:        
      Net    
  Affiliate     Activity   Income  
  BlackRock Liquidity Funds,        
  TempFund, Institutional Class               $ 17,210,121 $   19,561  
(i)   Represents the current yield as of report date.    

  • For Fund compliance purposes, the Fund’s industry classifications refer to  
        any one or more of the industry sub-classifications used by one or more  
        widely recognized market indexes or ratings group indexes, and/or as  
        defined by Fund management. This definition may not apply for purposes  
        of this report, which may combine industry sub-classifications for reporting  
        ease.            
• Financial futures contracts purchased as of January 31, 2010 were as  
    follows:            
    Expiration     Notional   Unrealized  
    Contracts   Issue       Date   Value   Depreciation  
13   30-Year          
  U.S.          
  Treasury     March        
  Bond       2010 $     1,562,849   $ (18,286)  
• Credit default swaps on single-name issues – buy protection outstanding as  
  of January 31, 2010 were as follows:      
  Received     Notional    
  Fixed       Counter-     Amount   Unrealized  
  Issuer   Rate   party   Expiration   (000)   Depreciation  
  Nordstrom,       5.20%         Deutsche   June      
  Inc.         Bank AG   2014   $ 1,000   $ (182,326)  

• Fair Value Measurements — Various inputs are used in determining the
fair value of investments, which are as follows:

• Level 1 — price quotations in active markets/exchanges for identical
assets and liabilities

• Level 2 — other observable inputs (including, but not limited to:
quoted prices for similar assets or liabilities in markets that are
active, quoted prices for identical or similar assets or liabilities in
markets that are not active, inputs other than quoted prices that are
observable for the assets or liabilities (such as interest rates, yield
curves, volatilities, repayment speeds, loss severities, credit risks and
default rates) or other market-corroborated inputs)

• Level 3 — unobservable inputs based on the best information
available in the circumstances, to the extent observable inputs are
not available (including the Fund’s own assumptions used in
determining the fair value of investments)

The inputs or methodologies used for valuing securities are not
necessarily an indication of the risk associated with investing in those
securities. For information about the Fund’s policy regarding valuation
of investments and other significant accounting policies, please refer to
the Fund’s most recent financial statements as contained in its annual
report.

4 BlackRock Credit Allocation Income Trust III January 31, 2010

Schedule Investments BlackRock Credit Allocation Income Trust III (BPP)
of (continued)

The following table summarizes the inputs used as of January 31, 2010  
in determining the fair valuation of the Fund’s investments:  
  Investments in  
Valuation Inputs   Securities  
  Assets  
Level 1    
Long-Term Investments:    
        Preferred Stocks   $ 48,484,518  
        Trust Preferreds   26,703,085  
      Investment Companies   495,000  
Short-Term Securities   68,668,495  
Total Level 1   144,351,098  
Level 2    
Long-Term Investments:    
        Capital Trusts   56,446,455  
        Corporate Bonds   60,224,641  
        Preferred Stocks   11,536,896  
        Trust Preferreds   219,395  
Total Level 2   128,427,387  
Level 3    
Long-Term Investments:    
        Capital Trusts   3,618,177  
        Common Stocks   33,444  
        Corporate Bonds   180  
        Preferred Stocks   3,208,997  
Total Level 3   6,860,798  
Total   $ 279,639,283  

  Other Financial Instruments 1  
  Assets   Liabilities  
Level 1   $ 13,281$   (18,286)  
Level 2                                         -   (182,326)  
Level 3                                         -   --  
Total   $ 13,281$   (200,612)  
  1 Other financial instruments are financial futures contracts, options  
    purchased and swaps. Options purchased are valued at market value  
    and financial futures contracts and swaps are valued at the unrealized  
    appreciation/depreciation on the instrument.    

BlackRock Credit Allocation Income Trust III January 31, 2010 5

Schedule Investments BlackRock Credit Allocation Income Trust III (BPP)
of (concluded)

          The following table is a reconciliation of Level 3 investments for which significant unobservable inputs were used to determine  
          fair value:              
    Investments in Securities      
  Capital   Common   Corporate     Preferred    
  Trusts   Stocks   Bonds     Stocks   Total  
          Balance, as of October 31, 2009   -   -   $ 12,000   $ 3,027,189 $   3,039,189  
          Accrued discounts/premiums   -   -   -     -   -  
          Realized gain (loss)   -   -   -     -   -  
          Change in unrealized appreciation   -            
            (depreciation) 3     $ (1,150,814)   1,172,438     9,090   30,714  
          Net purchases (sales)   -   1,184,258   (1,184,258)     172,718   172,718  
          Net transfers in (out) of Level 3   $ 3,618,177   -   -     -   3,618,177  
          Balance, as of January 31, 2010   $ 3,618,177   $ 33,444   $ 180   $ 3,208,997 $   6,860,798  
3 The change in unrealized appreciation/depreciation on securities still held at January 31, 2010 was $30,714.    

BlackRock Credit Allocation Income Trust III January 31, 2010 6

Item 2 – Controls and Procedures

2(a) – The registrant's principal executive and principal financial officers or persons performing similar
functions have concluded that the registrant's disclosure controls and procedures (as defined in Rule
30a-3(c) under the Investment Company Act of 1940, as amended (the “1940 Act”)) are effective as
of a date within 90 days of the filing of this report based on the evaluation of these controls and
procedures required by Rule 30a-3(b) under the 1940 Act and Rule 13(a)-15(b) under the Securities
Exchange Act of 1934, as amended.

2(b) – There were no changes in the registrant's internal control over financial reporting (as defined in Rule
30a-3(d) under the 1940 Act) that occurred during the registrant's last fiscal quarter that have
materially affected, or are reasonably likely to materially affect, the registrant's internal control over
financial reporting.

Item 3 – Exhibits

Certifications – Attached hereto

Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company
Act of 1940, the registrant has duly caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.

BlackRock Credit Allocation Income Trust III

By: /s/ Anne F. Ackerley
Anne F. Ackerley
Chief Executive Officer of
BlackRock Credit Allocation Income Trust III

Date: March 19, 2010

Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company
Act of 1940, this report has been signed below by the following persons on behalf of the registrant
and in the capacities and on the dates indicated.

By: /s/ Anne F. Ackerley
Anne F. Ackerley
Chief Executive Officer (principal executive officer) of
BlackRock Credit Allocation Income Trust III

Date: March 19, 2010

By: /s/ Neal J. Andrews
Neal J. Andrews
Chief Financial Officer (principal financial officer) of
BlackRock Credit Allocation Income Trust III

Date: March 19, 2010

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