I have known people who make statements like, "I'm no good" specifically to manipulate others in to offering them some sort of positive affirmation. Often these people grew up with little expression of parental love or affection. In a way this deficit is managed by seeking from others that which they never received developmentally.
I have come to see it not so much as a character flaw, but as an indicator of a type of injury like a scar.
If someone does exaggerate something, it may not be something nefarious as opposed to just a coping mechanism.
Thinking you have exaggerated may indicate that you really have exaggerated in the past and are starting to discover that you either need to do so less or have move past needing to. It may also be that you haven't actually exaggerated, but feel the need to see yourself as guilty of something. This can be a more difficult situation because it could reflect a degree of an inclination towards self-harm.
Self-evaluation can be difficult if you receive comments from others that are inaccurate such as praise or criticism. It would be essential to have an accurate view of yourself so that you can best measure if there is actually an inclination to exaggerate or not. It can also be helpful to favor "shades of gray" categories. If person is faced with claiming mental illness or not, it may be helpful to use expressions such as periodic episodes or occasional bouts of difficulty.