In order to create a believable novel or short story, you must first have believable characters.
The Story Isn't About Them
The story isn't about your characters. If you created your character first and then built everything around them, chances are you don't have a good story on your hands.
Don't get me wrong, characters are important, but the plot is even more important. First work on your plot, and then begin the character creation. Maybe I'm wrong here, but I don't think a plot stems from one character.
Avoid Mary Sue and Gary Stu
If you don't know who these people are, then chances are you've created them multiple times without even realizing it. Don't worry, everyone makes this mistake, and I'm one of those people.
Mary Sue and Gary Stu are perfect people, who never have anything wrong with them. I will give an example on who Mary and Gary are below.
Mary Sue grew up with perfect grades in school, she can play every instrument known to man, she's smarter than everyone, she never gets hurt, and even when her life should be falling apart, she always finds a way out unscathed. Somehow Mary Sue is incredibly ugly, but is described as a supermodel.
Gary Stu is a football player, or more like good at every sport known to man, and he has the perfect body, an eight pack to be exact. He's a bad boy that everyone is afraid of, yet he's drooled upon by horny teen girls. He's the hot CEO and the richest man in the world, and all the women fall to his feet.
In order to have believable characters, they need to be relatable characters. Bella Swan from Twilight Series is the perfect example of a Mary Sue, in my opinion. Apparently she is ugly, yet she manages to get all the guys around her to fall in love with her. When she turns into a vampire, she can control herself, even though she is a newborn and should be trying to rip people to shreds.
Simply avoid Mary Sue and Gary Sue, because they're too perfect, and they aren't relatable.
If your character isn't relatable to your readers, they won't feel invested in the story. Characters need flaws, it's what makes them more human. I'm not saying your character can't be good at something, they just can't be good at everything. They need flaws, and no, being clumsy like Bella Swan is not a real flaw.
Look around and learn from the people close to you. Do your friends have flaws? If so, use them. Do your parents have flaws? Use them. It's all about listening, watching, and learning.
Maybe your character is a little bit on the mean side, so they treat people like crap for no reason. That is a flaw. Or maybe your character jumps to conclusions and doesn't ask questions first. That is a flaw. If your character judges people before actually knowing them, then you have successfully given them a flaw.