It's not my favorite method to create character'sbackgrounds; I have an agreement with my players that they can create their background freely, but if something is missing, I'm free to exploit the blank areas of their character's life. But, my players are more experienced. Your submission is a wonderful idea for those who are not used with the character's background creation process. If a new player comes by, I'll use it, to make things easier. Congrats!
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It opens doors to many ideas. What lies underneath, what really happens there, who'd be brave enough to find out? Horror adventures don't need to be covered with blood and gore all the time. For me, the psychological effect on the players that will make things work.
Like, maybe it's just a place people are scared of because of ancient legends, and there's no evil there, at all. But playes don't really need to know that :)