Anything by Fritz Leiber is recommended. “Our Lady of Darkness” is an amazing work, Leiber’s “You’re All Alone” or “Conjure Wife” are also great horror works.
I think some of the best modern horror was written by T.E.D. Klein, who unfortunately hasn’t written much but what he did was classic. Check out his collection of 4 novellas, “Dark Gods,” and his novel “The Ceremonies”.
Ray Bradbury wrote some memorably scary stuff early in his career. Some of the best is collected in his short story collection, “The October Country.”
F. Paul Wilson’s Adversary Cycle is very good, especially the Repairman Jack novels, which are sort of action-horror. His vampire novel, “Midnight Mass,” draws heavily on his (lapsed) Catholic background.
Pretty old-school but very good is Algernon Blackwood. His short-story “The Willows” is seriously scary, even though you are not really sure what’s going on, and NOT the story you want to read before going camping. If you google it you can find it on-line.
William Peter Blatty is well known, but let me recommend some other good, lesser-known Catholic horror writers:
Russell Kirk is well-known as a political essayist in the conservative movement (his The Conservative Mind was the unifying book of the post WWII conservative movement, and he was a frequent writer for Willliam F. Buckley’s The National Review), but he had a second career as a writer of some pretty spooky ghost stories in the tradition of M.R. James (an Anglican cleric whose work I also recommend). Check out his best known novel, “House of Fear,” and “Lord of the Hollow Dark.”
Robert Hugh Benson, the son of an Archbishop of Canterbury, later became a Catholic priest and Monsignor. Benson wrote both Catholic apologetic works and some pretty scary horror fiction and was wildly popular a hundred years ago. Check out his very spooky “The Necromancers” (which delves deep into Catholic theology along with the horror, as all his works do and the then-popular practice of spiritualism). His “A Mirror of Shallot” is a little like “The Canterbury Tales” (or Straub’s “Ghost Story,” come to think of it), as a group of aging priests sit together after a communal dinner late at night and share stories of the strangest things that happened to them. His 1911 science fiction dystopia novel “Lord of the World,” which forecasts a future secular world terminally inhospitable to Catholicism (actually, fairly prescient), is also pretty spooky.
August Derleth, lacked H.P. Lovecraft’s fundamental loopiness but is known for preserving Lovecraft’s literary memory through the publishing house Arkham House, which he created. While Lovecraft was a staunch atheist materialist (Christopher Hitchens even includes one of HPL’s letters in his atheism anthology), Derleth was a dedicated Catholic. Some of his horror fiction still holds up pretty well.
Tim Powers is a modern Catholic writer whose work veers from Sci-Fi to Horror to Fantasy and is always enjoyable. The latest Pirates of the Caribbean movie was based on his novel On Stranger Tides. Gene Wolfe’s SF and horror writing is also informed by his Catholicism.
I would have made pretty much the same list.