A method for detecting damage in a bearing coupled to a rotating shaft of a rotary machine includes receiving one or more measurement signals from one or more first sensors for monitoring movement of the rotating shaft in one or more directions over a time period. The method also includes removing an effect of one or more environmental and/or operating conditions of the rotary machine from the one or more measurement signals over the time period. After removing, the method includes analyzing changes in the one or more measurement signals from the one or more first sensors, wherein changes in the one or more measurement signals above a predetermined threshold or of a certain magnitude are indicative of a damaged bearing. Moreover, the method includes implementing a corrective action when the changes in the one or more measurement signals are above the predetermined threshold.