Abstract Background A transdiagnostic and contextual framework of ‘clinical characterization’, combining clinical, psychopathological, sociodemographic, etiological, and other personal contextual data, may add clinical value over and above categorical algorithm-based diagnosis. Methods Prediction of need for care and health care outcomes was examined prospectively as a function of the contextual clinical characterization diagnostic framework in a prospective general population cohort (n = 6646 at baseline), interviewed four times between 2007 and 2018 (NEMESIS-2). Measures of need, service use, and use of medication were predicted as a function of any of 13 DSM-IV diagnoses, both separately and in combination with clinical characterization across multiple domains: social circumstances/demographics, symptom dimensions, physical health, clinical/etiological factors, staging, and polygenic risk scores (PRS). Effect sizes were expressed as population attributable fractions. Results Any prediction of DSM-diagnosis in relation to need and outcome in separate models was entirely reducible to components of contextual clinical characterization in joint models, particularly the component of transdiagnostic symptom dimensions (a simple score of the number of anxiety, depression, mania, and psychosis symptoms) and staging (subthreshold, incidence, persistence), and to a lesser degree clinical factors (early adversity, family history, suicidality, slowness at interview, neuroticism, and extraversion), and sociodemographic factors. Clinical characterization components in combination predicted more than any component in isolation. PRS did not meaningfully contribute to any clinical characterization model. Conclusion A transdiagnostic framework of contextual clinical characterization is of more value to patients than a categorical system of algorithmic ordering of psychopathology.