Grade 1: pests or low-power creatures (goblins, pixies, sprites, brownies, boggarts, gremlins, imps, ghosts*)
Grade 2: magical creatures that are for the most part considered "benign"; they are in their majority animals, such as tanukis, jackalopes, unicorns, phoenixes, carbunclos, etc., but others such as satyrs and centaurs are included since they mostly keep to themselves and rarely interact with humans.
Grade 3: humanoids, may have magical powers or simply posses some sort of supernatural abilities**. Include (but not limited to) nymphs/dryads/naiads, selkies, merepeople, fairies, elves, shapeshifters, werecats + werewolves, gnomes, dwarfs, nixies, kelpies, etc.
Grade 4: creatures that tend to be hostile and are generally categorized as "monsters"; vampires, sirens (NOT merepeople), demons, angels, banshee, ghoul, hellhound, ahuitzotl, etc.
Grade 5: creatures that appear in myth or legends, ex. the kraken, hydra, gorgon, cadejo, la llorona, chupacabra, leviathan, chimera. As a general rule, there is recorded evidence of only one of each species existing, with the exception to this rule being dragons***.
*lingering spirits of deceased people will manifest as ghosts, but since they are easily exorcised they are classified as grade 1. Most of them linger on after death due to some regret or unfulfilled wish, but once the wish is fulfilled (if it is doable), or the exorcist gets rid of the remaining guilt, they will pass on to the afterlife peacefully. However, this is not always the case: when the person's regret is too strong, they might become a wailing spirit, or in the case of resentment, a vengeful spirit, and they would be bumped up to a grade 4.
**magical powers =/= supernatural abilities. If someone is said to have magical powers it means they possess magical energy, which gives them the ability to learn magic, i.e., wield spells, learn potion-making, alchemy, and manipulate magic to form seals/tags/barriers. Supernatural abilities are innate to specific species, since they come from their natural energy. All living beings possess natural energy, but each species natural energy is different from one another. Examples of supernatural abilities may be shapeshifters being able to transform into [insert creature they transform into], or in the case of nature aligned spirits such as wood nymphs, manipulate natural phenomenoms, like accelerating the growth of plants.
Even though most magical creatures do not posses magical energy, they are called like this because their natural energy is stronger than "normal" creatures, and allows them to have supernatural abilities. A more correct term, however, would be "supernatural creatures", but the label is already too ingrained into current society to change it.
***dragons only achieved this status because at the time the current ranking system was created around 50 years ago, the dragons had already disappeared from the world, with the last of them leaving for the Lands Beyond more than 200 years ago. Because there was no way to judge its powers and evaluate them, they were categorized as a grade 5.