Are on account credits considered while determining the deliquency of customer invoice

I can provide an example.

The customer invoice due is 1000$ and has become delinquent, However there is an on account credit for 1200$ not applied to this invoice. Now in this case how will the system determine the delinquency?

We have Strategies set at the account level. Further when the reminder letters are sent to customers would the amount  it be net of credits or it would reflect  only Open due invoice amount.

Kindly advice.

regards

partha