The paper addresses one of the key problems in structural health monitoring -how to separate defects, both microscopic and macroscopic, accumulated in structural members from damage in the joints and boundaries. It is suggested to use a simultaneous set of measurements - nonlinear vibration frequencies and electrical conductivities - to distinguish between three distinct types of defects. Nonlinearities occur as a result of breathing internal cracks and slapping in damaged joints. The use of proper orthogonal decomposition and a local equivalent linear stiffness method allows for model updating to account for the damage. The theory is presented for full three-dimensional elastic solids and illustrated via the problem of a beam damaged both internally as well as at the boundaries.