Your reputation is based on many factors. If you have bad relations with other factions, it goes down (so you may have good standing with your allies, but if the rest of the world sees you as abysmal but not at war, your rep should go down). Also, i recall reading having a dreaded Faction Leader also lowers your reputation, among other actions.
You gotta think on a Global scale. Sure, "A" "B" and "C" love you, but if D-Z hate your guts because you never try to maintain relations with them, then theres way more people out there who definitely don't trust you

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