A Personal Story...
"Pilots have always named their planes. It's a tradition. It never occurred to me not to name the capsule. I checked with Dr. Gilruth and talked it over with my wife and with John Glenn, who was my back-up pilot. We all liked it".
Shepard added the "7" because the capsule he flew was factory Model No.7. Everybody thought it represented the Original Seven Astronauts, and that seemed such a good idea at the time that all of the rest of the Mercury series names also carried the "7"
The Real Thing
The name 'Freedom 7' was painted on the surface of the capsule. Chrysler-employee Cecelia Bibby, who would do the artwork for John Glenn, Scott Carpenter and Wally Schirra:
,,Al's 'Freedom 7' and Gus' 'Liberty Bell 7' were put on the craft by stencil. I don't know who cut the stencils although I heard it was one of the mechanics who taped the stencil to the craft and spray painted the name. The stencil was done in block letters."