It’s slang and it is correct. Le Petit Robert 1 (1993) has the following entry:

II V. intr. FAM. Être insuffisant, ne pas être à la hauteur (opposé à assurer).

Note that “ça craint” also is used to say “that sucks” (i.e. that situation in unpleasant), a usage which is not reported by my dictionary, but is in the 1990 edition (I’ll check the 1993 one once I get my hands on it once again).

5° Fam. Ça craint. c’est laid, désagréable.

Very common multi-purpose expression to say that:

On est nuls.

You can also say:

On est [trop] mauvais. (We are [so] bad)

On est des mauvais. (We are bad, and it’s in our nature)

On est minables.

On est des branques (branquignols). (slang)

On est des amateurs/touristes/bras cassés. (we barely have any skill to do that)

Since "we suck" is already quite vulgar, you can do the same in French.

On est des merdes/bouses.

If "we suck" at a game, you can say:

On joue comme des pieds/amateurs/branques/touristes..

"On craint." may be correct but very rarely used. To me, it sounds old (80s/90s).

I’m not a Montrealer, but I do live in Quebec (near Ottawa) and around these parts we use:

On est [trop/vraiment] poches.

or even:

On suce.

This last one is obviously a direct translation of the English and may not be used everywhere in Quebec. I don’t use it myself, so I’m not entirely sure if it can be used in every context, but I have heard it from younger persons.

"Poche" can be used in most contexts and can replace that meaning of "suck" in most situations, e.g.:

Mon cours est poche (My class sucks.)

C’est vraiment poche d’avoir manqué ça! (It really sucks to have missed it!)

T’es poche en conduite. (You suck at driving.)

On craint is a good translation but you can also hear:

On est nazes.

IMHO the French verb "craindre" (to fear or be wary of) is not even a little bit equivalent to the English verb "suck". The translation should at least retain some of the nature of the English word. If in English it’s vulgar, then the word in French should also be vulgar. I would use "c’est de la merde".

Sure you can say Montrealer (Montréalais). Inspired by another answer I would argue you can use in Montreal (Quebec):

On [ne] vaut pas d’la (de la) marde. [lit. "we’re not worth shit" with the vulgar
alternative to merde; in this localized spoken context, it’s important
not to use the negative particle ne like you would normally do i.e. on ne vaut as well as to drop the e in "de la" i.e d’la and to not pronounce mɛʁd but rather maʁd: On vaut pas d’la marde !]