A method for determining formation integrity during drilling of a wellbore includes determining an annulus fluid pressure in a wellbore during drilling thereof. The annulus pressure is adjusted by a predetermined amount. Flow rate of drilling fluid into the wellbore is compared to drilling fluid flow rate out of the wellbore. At least one of a formation pore pressure and a formation fracture pressure is determined from the annulus pressure when the compared flow rates differ by a selected amount. The method alternatively to determining pore and/or fracture pressure includes determining a response of the wellbore to the adjusted fluid pressure and determining the optimum annulus fluid pressure from the wellbore response.