When a person, place, thing, or idea sucks so bad that it is completely intolerable. You can think of the term "rate-shit" as giving a rating or score to something that sucks so bad, that it cant possibly fit anywhere on a scale of 1 to 10.
example 1- I tried to sharpen this pencil, but the lead keeps breaking and falling out. This pencil is rate-shit.
example 2- My friend, Kyle Martin, had a rate-shit invention idea for a futuristic DVD player.
example 3- The state Montana, found in the northern region of the United States of America, is rate-shit.