I'm taking an introductory folklore class this semester and I'm only a couple of weeks into it, but a lot of it is clicking and we've gone over the basic principles. From the very start, I realized folklore is something I needed to apply to my stories, and I think it can help you as well.
There's a misconception that folklore is something old, quaint, and untrue that dredges up the picture of people in Eastern Europe somewhere, perhaps of women wearing shawls and all that good stuff.
The truth is folklore is very much about groups--how we fit into them and how other people make their way into them. It's about inside jokes and stories and nicknames and a bunch of other things.
What does this have to do with characters? Well, as I had this great folklore stuff rolling around my noggin, I was thinking about the folklore I had developed for my characters.
Which was none.
These characters of mine (or at least of my main WIP) have been friends for years. They should have nicknames for each other (ones that don't make sense usually), their own lingo, stories they refer to that remind them of a lesson they learned together, etc.
For example, my friend calls me chicken. I have no idea why. I think it's just something she calls people. Meanwhile, I had to call her something back, of course. The natural choice would be to call her turkey, but since I'm vegetarian, she's my Tofurkey. This is an example of verbal lore. It identifies my friend and I as part of a group. A small group, but a group nonetheless (a group of two is a dyad, just fyi).
This same friend had another group of friends that she grew up with. They loved Ninja Turtles and they each corresponded to a particular turtle. SO one of the friends got each of them a Ninja Turtles hat.
That's an example of material lore.
Long lesson short: if you have any group of people no matter how big or small, they're going to have their own folklore. Developing this can help to flesh out your story (it's certainly helping mine). For example, I figured a suitable name for a character of mine that can control wind would be airhead. Now, as I was writing this down though, it struck me that maybe this name shouldn't make that much sense. Maybe it seems to outsiders that she's called airhead because of her powers, but in reality it's because her friends bring her that candy whenever she's sad.
Every family has folklore. Every couple. Every group of friends. Every group of coworkers.
Inside jokes. Nicknames. Stories. Lingo. All that good stuff that is a component of being human and socializing.
Hope this helps! Let me know in the comments of some examples of folklore you can think of and if you have any already going in your story that you particularly like. Happy writing!