This thesis is based on data obtained from conducting investigations concerning financial literacy among rural households in Shaanxi and Yunnan in 2016. The study chooses the Heckprobit model based on the instrumental variable for conducting its analysis, identifies the influencing factors of rural household credit demand, especially the credit constraint, and conducts high-spot reviews on the effect and heterogeneity of financial literacy. The research shows that the financial literacy has an obvious positive impact on the credit demand, i.e. the higher the financial literacy level of the rural household, the bigger the credit demand that the rural household will have; the financial literacy has an obvious negative effect on the formal credit constraint, without any prominent impact on the informal credit constraint or the overall credit constraint. It means that promotion of the rural household’s financial literacy level can only ease the formal credit constraint, and worse, the higher the financial literacy level is, the weaker the formal credit constraint of the rural household will be.