I know someone who went to Reed College, which has semi-famously not suffered from grade inflation[1]. They send your transcripts out with an explanatory note, so that the recipient will not view the graduate poorly when they see the numbers.

Interestingly, at Reed, there is a low emphasis (or even anti-emphasis) on grades — a student has to go out of their way to obtain them. Instead, emphasis is on written feedback and discussion, to understand one's performance on assignments.

All this to say: de-emphasizing grades in school is not necessarily a bad thing, and does not necessarily harm the reputation of the university. It can be a sign of good priorities (eg: learning, rather than numbers-gaming).

[1] https://www.gradeinflation.com/Reed.html