I always recommend that parents put grades on every class on your homeschool transcript. Either letter grades (A, B, C) or number grades (4.0, 3.5, 3.) will be equally helpful, but grades are important. I do not recommend using Pass or Fail on your transcript.
Colleges award scholarships based on the GPA of your child - and the GPA is determined by the grades you provide. Without grades, you can't get a GPA. Colleges may still award scholarships based on test scores, but give them the option of giving you their best scholarships by providing them with grades.
When my boys were in school, I did put grades on their transcripts. I've met some homeschoolers that would never put a letter grade on the transcript when they gave the grade themselves. I've met other homeschoolers that would never put a grade that they've gotten from accrediting agencies. But as I talk with colleges, they have made it clear: they want grades on the transcript.
All teachers worry about having subjective grades. Homeschool parents worry about that too. Just create a transcript with grades, putting on the transcript what you know to be honest and true.
Colleges know that in general homeschoolers tend to work for mastery. If you work for mastery in your own home, you could feel comfortable giving them a 4.0. This means that they knew it before moving on. It doesn't really surprise colleges when they see really good grades on a homeschool transcript. When they see you give a less than perfect grade, a lot of times that would say that you’re a rough grader.
As long as you have documentation for the grades you give and the SAT or the ACT scores. Those documents, when given together, look like a natural thing which doesn't freak them out at all. Learn more in this article: Super-Size Scholarships with Outside Documentation.