Why do credit ratings go down with each inquiry?

Is this true and why?

Public Comments

1. The idea is that the inquiries are from you requesting credit cards from companies. That may not always be the case. Sometimes it's utility companies. Anyway, the more you're requesting credit, the less likely you have stable credit. I don't necessarily agree, but that's the reasoning behind it.
2. Yes.. but only slightly. If you are buying a car and several dealers are on your report this is normal. Applying for actual credit and getting denied is a little different. Many factors are taken into account for each individual type of application. Sometimes for the best rates or even 0% you need to be at 700 and above. Good paying patterns will see you through even with lower rating overall.
3. It is true. The problem is that potential creditors are worried that you need the money too bad. It shouldn't be a huge drain unless your credit is already borderline.