10 Steps to Creating Lovable, Believable Characters
1.) What does s/he look like?
It's important to have a very good vision of your character's appearance in your mind while you write. And keeping notes in a journal/notebook or on index cards is a good idea. (Or another file in your computer, since that's what kids are doing now-a-days.) That way you don't say the character has blue eyes in chapter 2, and then brown eyes in chapter 11. Sometimes I cheat and steal certain characteristics from actors/actresses, that way I can just reference a picture when I need to.
2.) What does s/he act like?
Sometimes, when I take notes on my index cards, I put down things like "broods like Snape," or "curious like Alice." I'll write things like "massive flirt," or "gets angry at the drop of a hat." These notes help remind me that when I'm writing these characters, to make sure and keep their mannerisms and dialogue consistent. It's confusing and frustrating when characters act a certain way at the beginning of the book, and change drastically by the end. (Unless, of course, there is conflict and character development to help lead the characters to new personality traits. For the purposes of character creation, though, make sure to take notes on how your character is at the beginning of the story.)
3.) What backstory would lead to that personality and/or appearance?
Keeping the backstory consistent with the character's physical description and personality description is really important. If a character is covered in battle scars and gruff toward everyone, there has to be a reason for it. Perhaps he was injured in a war, and is suffering from post traumatic stress. (Mad-Eye Moody?) Likewise, if a character is overly friendly, naive, and young, it's possible that this character has been sheltered her whole life. (Anna of Arendelle?)
4.) What are her/his goals?
If you don't know where your character wants to be in his or her life, character creation is a wonderful time to start brainstorming those things. A very specific goal is very easy to write--and will drive the story forward. It's when we get characters with conflicting goals that makes for good drama. Where would The Fellowship be if Frodo hadn't decided to take the ring to Mordor?
5.) What are her/his fears?
Likewise, your character needs to have things that are holding her back. Things she fears, things that make her more believable and well rounded. A character with no internal conflict makes for boring reading, even if the external conflict abounds. That iconic scene where Rapunzel reaches the ground outside of her tower in Tangled wouldn't be nearly as heart-warming if she was gung-ho about leaving and had no second thoughts about hurting her "mother's" feelings.
Now you have a pretty good idea of who this character is. Next you have to make sure the character isn't irritatingly perfect, or irritatingly flawed.
6.) Does your character have 1 flaw for every 1 merit?
This is a pretty basic idea. Take your index card/notebook/word document, split it down the middle, and start brainstorming the merits of your character on one side, and her flaws on the other. If there's more on one half than the other, you may need to adjust. There are, of course, exceptions to this rule. Villains are allowed to have more flaws than merits, or vice versa. Not all of these merits and flaws will be made immediately known to the reader, which is another thing to keep in mind. Also, sometimes one huge merit can outweigh a ton of flaws, or vice versa.
7.) Are your character's merits/flaws trendy? Over-used?
I'm sick to death of characters who "read too much" or are clumsy. I would prefer to read about fresh characteristics, ones that haven't been over used. Take a look at the real-life people around you, and "borrow" some of their merits and flaws. Do you have the best dad ever? (My daughters do.) Maybe your character can be an amazing father. Do you know one of the "entitled generation?" Maybe your character is arrogant and self-important. These are much better than something we've read time and time again.
8.) Are your character's physical traits believable?
If you considered "too pretty" to be one of your character's flaws, just stop. Just stop now. It would be a fantastic, wonderful, amazing world if the physical characteristics of characters in fiction and literature mirrored the physical characteristics of people in the real world. People are fat. And thin. And tall. And short. Some have duck feet. Some are pigeon toed. Some wear glasses, and some don't. Race, gender, cultural background and time period are all things to consider when creating your characters. Diversify, and you'll find it'll be more fun to write and more fun to read.
9.) Does your character have a backstory that makes us sympathize with her/him?
Imagine if Harry Potter had grown up a jerk instead of a modest young man. Or if Annie hated the world because of the way she was treated in the orphanage. These are a couple of instances in which the backstory makes the character more endearing. It would be quite easy to use the backstory for these characters to try and force emotional reactions out of the reader, therefore turning him or her off of your story.
10.) Will you or your readers be jealous of her/him?
There are two different kinds of jealousy. One is the kind that makes you dislike a character and the other is the kind where you want to be that character (Tony Stark). It's okay to give your characters good things in their lives, but make sure that they're believable, and that they move the story forward. No one wants to read about Scrooge McDuck counting all of his precious gold all day with no conflict and no character development. Giving a character things struggle with and things to rejoice about will make him or her more well rounded in the long run.
These intricacies will give your readers reasons to root for or against your characters in their endeavors. Hopefully the passions in your characters will drive the story forward.
Oh, one more thing:
11.) Is your character the "Every Man"?
It's acceptable, maybe even encouraged, to have one character who is "normal." He is the sounding board for everyone else's crazy. The Jim Halpert or Arthur Dent, even Yossarian with all of his crazy is a "straight man" when the world around him goes insane. Having one boring character amidst a handful of interesting ones is perfectly acceptable--and may be a relief for both writer and reader alike.
That being said, good luck writing your characters! Keep them consistent, change them when the plot organically causes character development, and for goodness sake, don't stop writing!