I rate based on five criteria: plot (i.e. how innovative or engaging it is, how well it is executed throughout the show), storytelling (i.e. pacing, how well the story arcs come together, narrative elements), characters (their dynamic with each other, how they develop throughout the series), atmosphere (i.e. how well the show's setting, animation and music work together to create the mood of the show), and enjoyment. All ratings are subjective, and mine are no exception, especially because enjoyment is one of my main criteria. However, I do strive to be as objective as possible when rating an anime based on the other four criteria.
In terms of numbers, my ratings are as follows:
1 and 2 - Pretty damn terrible, and not in the "so bad, it's good" kind of way. Viewing this show is potentially hazardous to one's health.
3 - Has pretty much no redeeming qualities. Steer clear of this one.
4 - Below average. Could be entertaining for a short while if you switch your brain off, but on the whole, not recommended unless you are pretty desperate for something to watch.
5 - Mediocre. May appeal to some, but can usually be overlooked in favour of better and more enjoyable shows.
6 - Above average. A lot of people are quick to dismiss anything rated 6 and below as not worth watching, but in my view, a show rated 6 is not a bad show. It's just rather hit and miss. It's still entertaining, but it has some major flaws that detract from its quality as a whole. Still worth trying out if one is having trouble finding new shows to watch, some of these may just tick all the right boxes for you.
7 - A good show that I enjoyed, but had one or two flaws usually concerning the execution of the plot, the pacing, or perhaps character development.
8 - A great show. On top of being very enjoyable, this show stood out from the rest by possessing elements that were exceptionally good, e.g. a great atmosphere or an entertaining cast of characters, but was just missing that little something that could have pushed it above the threshold to amazing.
9 - A brilliant show. Excelled in two or more major components, i.e. plot, storytelling and/or character development. Still not quite ground-breaking enough to be called a true masterpiece, though.
10 - As close to perfect as it gets. A must-watch.
I strive to be a little bit strict with my ratings, that is why I currently have no 10s. A "10" on MAL denotes that a show is a masterpiece, and I truly believe I've yet to see an anime worthy of that label. Then again, I am fairly new to the world of anime, so I'm pretty optimistic about seeing what else this medium has to offer.