Should You Background Check Your Contractor?

You are about to hand someone the keys to your house, let them tear open walls, and write them a check for thousands of dollars. Contractor fraud is one of the most common consumer complaints in the United States, with homeowners losing an estimated $17 billion annually to unlicensed, uninsured, or dishonest contractors. A quick background check is the cheapest insurance you can buy.

The Contractor Fraud Problem

Contractor scams follow a predictable pattern: collect a large deposit, do minimal or no work, then disappear. Some unlicensed contractors do shoddy work that fails inspection and costs more to fix than the original project. Others have patterns of taking deposits from multiple homeowners simultaneously before vanishing.

The most dangerous contractors are not random strangers — they are the ones who seem professional, have a website, and give you a reasonable-sounding bid. Appearance is not evidence of legitimacy.

What a Background Check Reveals

• Criminal history — fraud, theft, and larceny convictions are red flags for someone who will handle your money
• Civil lawsuits — has the contractor been sued by previous clients? Multiple lawsuits for breach of contract or shoddy workmanship tell a clear story
• Liens and judgments — unpaid debts and court judgments suggest financial instability, which often leads to cutting corners or abandoning projects
• Business registration status — is their business actually registered? Is their contractor's license active and in good standing?
• Bankruptcy filings — a contractor operating under a new business name after a previous company went bankrupt is a common pattern

Check the License Separately

Most states require contractors to hold a license for work above a certain dollar threshold. Your state's contractor licensing board website lets you verify that a license is active, check for complaints, and see any disciplinary actions. This is free and takes two minutes.

A background check complements the license check by revealing information the licensing board does not track — like criminal history in other states or personal civil lawsuits.

Verify Insurance

Ask for a certificate of insurance and call the insurance company directly to verify it is current. An uninsured contractor who gets injured on your property can sue you. Uninsured work that causes damage to a neighbor's property becomes your liability.

A CROW Clarity Brief covers criminal records, liens, and business filings — everything you need before signing a contract.

The Red Flag Checklist

1. They demand full payment upfront (standard is 10-30% deposit)
2. They only accept cash or do not provide receipts
3. They pressure you to decide immediately
4. They cannot provide references from recent projects
5. Their business address is a P.O. box or does not exist
6. They showed up in your background check with fraud or theft convictions

A CROW report costs a fraction of what even a minor contractor dispute will run you in legal fees. Run the check before you sign the contract, not after the problems start.