Interesting I knew none of this. That would certainly make the game a bit deeper -would love to know more about this
Yes, Bannerlord isn't great at presenting its mechanics to the player.
The way it works now, without getting into technical details:
Certain actions push your character's trait in various directions. Doing honorable things -- like upholding your agreement to do something -- on a consistent basis will eventually lead to your character being treated (by the game) as an honorable fellow. This follows with the other traits. For the majority of the traits, these pushes are done through quest decisions for right now, but certain actions merit as well. For the most part, they are common sense: fleeing or retreating from battle obviously sets you up as a coward and raiding villages constantly marks you as cruel, while destroying bandit hideouts aids in your rep as an honorable person.
People with the same trait get a very modest boost to relations, while those with the opposite trait take an equivalent penalty. It is possible to gain multiple traits: you can be Cruel, Honorable and Cautious at the same time or both Daring and Devious. Other than that, a few other effects -- the increased chance of bandit surrender to Daring lords, an increased chance of being executed for being Devious (possibly the only chance) -- just about sum it up.
Right now though it is clearly a work-in-progress.