1) Make the first move
If a contractor comes to you unsolicited looking for business, he may not be reputable. Ignore the contractor who comes knocking on your door with an offer and go find someone on your own.
2) Ask a test question
Test him with a question you already know the answer to. For example, if there's a crack in your wall, say something like, 'I hope I don't need to re-sheetrock the entire room!' If he responds, 'You very well might,' he's probably trying to scam you.
3) Ask for references
Ask for references from three other customers from three different time periods. Even a bad contractor can do a good job once, and you want to prove that he's consistent. If he hesitates to give you the information, run!
4) Get his card
Ask for his business card; if there's a post-office box instead of a real address, that's a red flag. Call the number on the card and make sure he picks up; some numbers are voicemail services you can't trace.
5) Check him out
Call the Better Business Bureau and see if there are any complaints about him, and the State Board of Contractors to make sure he's reputable. Also, search for him online; if he's a scammer, others may have posted complaints about him.
6) Get it in writing
Never trust a contractor who says you don't need a written contract. And don't sign a blank contract or one with blank spots; he could write anything in there later and you would be responsible.
7) Ask about permits
If there's a lot of construction work, odds are you'll need permits from your city or county. If he says you don't need them, or insists you get them, that's a sign he's not licensed.
8) Pay by check
A reputable contractor will never insist on cash or a big deposit. A reasonable down payment is 30% of the total cost. And don't give the remainder of the money until the job is done and you've inspected it.
** Evan's tip: If the contractor requires you to pay for materials, do not give him money until after the materials are on your property. Once they are in your possession and paid for, they are your property. If the contractor tries to remove them it's theft.