How do you come up with your characters? Are they based on people you know? Do you make them all up from your imagination? These are probably the most frequent set of questions posed to me by people who don't write. The answers? Um, a few different ways, no, and no. Let me explain.
First, there are a lot of ways I come up with my characters. Most main characters begin with an idea of the general type of person I want to go on the wild adventure I just dreamed about. Most of them have a basic outline already in my head, a certain look and maybe some personality attached already. From there, it's a combination of things. Some of the time their characteristics come as amalgams of people in my life. Not close enough so as you'd actually notice, but general traits. Things like tenacity, stubbornness, sense of sly humor, are what I'm talking about here, not their looks, backgrounds and other more personal traits. So while someone may have the same serious streak as one of my characters, overall they'll probably be so different a connection wouldn't be made.
From there, however, things go quite differently. Once I've fleshed out the basics with my characters, they start to take on lives of their own. And as the story continues, they continue to grow and evolve. The background I've given them affects them, but their actions in the story also influence how they change. It's important to do that, because it makes them more realistic, more believable the further into the story you get. A character that changes allows for more personal conflict to develop, and become more intimately attached to the reader. There's more at stake when you see the character develop naturally, as you'd do under the same circumstances. So while there may have been a seed of inspiration from a living muse, by the time the character's life unfolds on the pages of my story, they are far more influenced by their own "lives" than by anything else.
Minor characters are sometimes a bit different. I think I create them a little more arbitrarily than I do the major ones. I think it's more out of necessity - more to create a specific character for a specific need - than anything. I'll often form them as adaptations to particular needs of the plot. This isn't to say they don't evolve themselves, though. Sometimes they take on a life of their own and take over the story to such an extent that they're really main characters too. That's not a bad thing, either. Once again, it's a great way to bring them to life for the readers.
There's also a lot in a name. Sometimes I change the name of a character to suite their personality or characteristics better, to make them more identifiable to the reader. Of course, since this is terribly subjective, it's not much of a science at all. For example, a name like Katherine can evoke very different images for different people. Some may instantly think of Katherine Heigl, while others will associate the name with British Royalty, or simply a Katherine they happen to know. And calling her Katherine will give the character a very different feel than calling her Kate, or Kitty, or Kat, or Kathy, or Katerina. Each of those variants probably gave you a different image of what that character may be like. Because of that, it's important to try to get as close as possible to the ideal image you want the majority of your readers to have when reading about her.
In the end, it's all pretty much a matter of choosing a couple of arbitrary details and letting the character tell you who they are on their own. I may start with details close to my own life, it's the character's life that ends up coming through in the end.