It's possible to gain negative or positive reputation, such quantity is added to your reputation pool. But if you lose reputation, its value goes towards zero. The more reputation you have, be it negative or positive, the higher in rank you'll be placed and different effects will be active in your character.
Your higher and lower reputation levels are going to be saved into your character's history log, and an average of gained positive/negative reputation will be saved as well, changing what contracts you are allowed access.
Accomplishing or failing in quests; killing NPCs, players, or mobs; and dialogue actions can change your reputation value.
Reputation gain/loss is modified according to who is being affected by such action or mission, the order is:
1. Isolated: homeless; isolated citizens; civil travelers.
2. Low Influence: unsociable citizens; no witnesses job; from a paying common job mission.
3. Normal: common citizens; merchants; hard-paying job missions.
4. Societies: groups, villages, cities, or kingdoms (as a whole or their representatives).
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The reputation level's effects are accumulative as it ascends the negative or positive ladder, increasing in its effect each level up.
[-5] Underlord: chosen reputation, unlocks weekly Underworld missions.
[-4] Public Enemy: positive reputation gain is decreased.
[-3] Bounty Head: players are going to be rewarded with gold when killing you. You lose the same amount of such gold bounty.
[-2] Ruffian: shop prices increase both for selling or buying.
[-1] Bad: Access to outlaw missions.
> [0] Neutral: no effects, this is the starting reputation.
[+1] Good: Access to watchguard missions.
[+2] Reliable: shop prices decrease both for selling and buying.
[+3] Savior: players are going to be rewarded with extra reputation when killing you. You lose the same amount of such extra reputation.
[+4] Legend: Negative reputation gain is decreased.
[+5] Royalty: chosen reputation, unlocks weekly Royal missions.
Levels of Underlord or Royalty can be chosen after reaching a certain amount of reputation. When unlocked, a Royal/Underworld mission is given each week that is harder or equal to Legendary but has higher rewards, if you do not accomplish such mission within that week you'll not only descend in reputation level but you'll also lose a great amount of gold.
Reputation is according to law perspective, there also is a reputation meter according to each group or individuals you interact with but such values aren't public, only showing the level with a "+" or a "-", going up to five of each when seeing the reputation with Divine Vision's deeper insight. It's unknown if there are any benefits with NPCs individually, but it is noticeable with social groups by their people being more open in giving information or allowing you to access their locations.