This paper investigates the relationship between micro-entrepreneurs’ financial literacy and access to bank credit. We theorise that financially literate micro-entrepreneurs are more likely both to apply for a needed bank loan and to obtain it. Using data on a representative sample of Italian micro-entrepreneurs surveyed by the Bank of Italy in 2021, we find that financial literacy boosts their chances to ask for credit when their firm needs it, i.e., they are less likely to be “discouraged borrowers”. Instead, financial literacy does not affect the chances to obtain the requested loans. We reveal two mechanisms which partially explain these relationships: financially literate micro-entrepreneurs are more likely to seek professional advice and to be aware of the existence of public guarantee schemes, both of which improve the chances of loan application. Our results suggest that policies aimed at strengthening financial literacy effectively complement traditional supply-side measures to reduce micro-entrepreneurs’ credit constraints.