Picking a contractor is sort of like choosing a book for your beach reading. If you take the time to do it right up front, you'll have a relaxing experience. But if you rush it or fail to think it through, you're likely to get burned.
So, here's a checklist to make sure you don't get taken advantage of by your contractor.
Read the reviews. Just like going to a restaurant or buying a book, you should read the online reviews of every contractor you're considering. You can do this through sites like Angie's List, Home advisors, or Yelp. While a bad review may not be a reason to throw someone out completely, be sure to look at the dates of the reviews to get a sense of their work over time.
Get three bids, don't pick the lowest. It's an industry rule that every contractor knows--they will be asked to give estimates. Explain to your three finalists that you'll be getting bids from two other candidates and that you are going to go with the one that gives you the most confidence. This should never be the lowest bid, but one of the other two. Look at the level of detail in the estimate when making a decision.
Search for Liens. A lien is basically a notice attached to a property saying that someone owes money. Make sure that the contractor doesn't have any liens or other judgments. You can look these up online at theSecretary of State's website.
License and insurance. Every contractor should have a license and insurance. This can be a bit tricky out in Hamilton County, since our many different towns have different laws. (More about licensing in Central Indiana.) But the simple answer is that when you call a contractor to come out for an estimate, explain that you want them to also bring a copy of their license and their certificate of insurance.
Get Recommendations. Perhaps the most obvious step in getting a trustworthy contractor is to seek the advice of people you know. There is a great network effect in place here: once a contractor has helped an individual person, they are more likely to do good work for their friends and neighbors. After all, they are traversing a "web of trust" through each referral.
That should get you started. Good luck on your renovation project and especially on selecting the right contractor partner!