"Horror Fiction in Seven Spooky Steps" would have appeared to be a much stronger episode had it not aired after "Remedial Chaos Theory,” both featuring different stories told from different perspectives, but it's another strong episode nonetheless. Scheduling does weird things sometimes and this was one of the instances.
The core of the episode is the characters telling a scary story. Most of them are not good storytellers, with only Annie and Troy telling remotely interesting stories, but the stories are very funny because we can immediately recognize the personality behind the stories and there is plenty of gruesome images throughout the episode
Like most Community episodes, "Horror Fiction in Seven Spooky Steps" ends on a positive note, as the fighting which spread until the end of the episode is resolved. There's no psycho in the group and everyone is happy with each other.