<PAGE>
 
                                                                   Exhibit 10.74

                              THIRD AMENDMENT TO
                     AMENDED AND RESTATED CREDIT AGREEMENT
                     -------------------------------------


     This Third Amendment to Amended and Restated Credit Agreement ("Agreement")
is made as of this 29 day of January, 1998 by and between PSINet Inc. (f/k/a
Performance Systems International, Inc.), a New York corporation ("PSI"), (PSI
hereinafter sometimes referred to as "Borrower" or "Borrowers"), and Fleet
National Bank, formerly known as Fleet National Bank of Connecticut, successor
by merger to Fleet Bank of Massachusetts, N.A. (hereinafter referred to as the
"Bank"), as lender.

     WHEREAS, as of November 30, 1994, PSI and the Bank entered into a Credit
Agreement (the "Original Credit Agreement");

     WHEREAS, as of March 24, 1995, PSI and the Bank entered into an amendment
to the Original Credit Agreement (the "First Amendment to Credit Agreement") to
(i) increase the term credit from $2,000,000 to $8,500,000, (ii) add the then
newly-acquired PSINet Pipeline New York, Inc. ("Pipeline") as a guarantor and
(iii) otherwise amend the Original Credit Agreement, all as set forth in the
First Amendment to Credit Agreement;

     WHEREAS, as of November 10, 1995, PSI, InterCon Systems Corporation
("InterCon"), Software Ventures Corporation ("Software") and the Bank entered
into an Amended and Restated Credit Agreement (the "Amended and Restated Credit
Agreement") which amended and restated the terms of the Original Credit
Agreement as amended by the First Amendment to Credit Agreement to (i) increase
the revolving credit from $1,500,000 to $5,000,000, (ii) add Software and
InterCon as borrowers under the revolving credit (to the extent provided
therein), (iii) increase the term credit from $8,500,000 to $13,500,000 and (iv)
make certain other changes, all as set forth in the Amended and Restated Credit
Agreement;

     WHEREAS, on or about April 8, 1996, Software merged with and into InterCon,
with InterCon as the surviving entity;

     WHEREAS, as of August 13, 1996, PSI, InterCon and the Bank entered into a
First Amendment to the Amended and Restated Credit Agreement (the "First
Amendment to Amended and Restated Credit Agreement") to (i) increase the term
credit from $13,500,000 to $18,500,000, (ii) extend the Term Credit Expiration
Date to June 30, 1997, and (iii) make certain other changes, all as set forth in
the First Amendment to Amended and Restated Credit  Agreement;

     WHEREAS, as of February 1, 1997, PSI and the Bank entered into a Second
Amendment to Amended and Restated Credit Agreement (the "Second Amendment to
Amended and Restated Credit Agreement) to (i) consent to the sale of the stock
of InterCon and to release all obligations of InterCon and Software to the Bank,
including without limitation, all guarantees and security interests, and (ii)
make certain other charges, all as set forth in the Second Amendment to Amended
and Restated Credit Agreement;
<PAGE>
 
     WHEREAS, on or about June, 1996, the assets of Pipeline were sold; and

     WHEREAS, the Borrowers and the Bank now desire to further amend the Amended
and Restated Credit Agreement (as amended by the First Amendment to Amended and
Restated Credit Agreement and the Second Amendment to Amended and Restated
Credit Agreement, hereinafter referred to as the "Credit Agreement") to (i)
establish a new acquisition term credit in the original principal amount of
$20,000,000 to finance the purchase of stock of iSTAR Internet Inc., a Canadian
company, and for working capital, (ii) extend the expiration date of the
revolving credit to March 31, 1998, (iii) cause delivery to the Bank of an
outstanding letter of credit issued by the Bank on December 31, 1997, as amended
to date, and (iv) make certain other changes, all as set forth in this
Agreement.  Unless otherwise defined herein, capitalized terms used herein shall
have the meanings ascribed to them in the Credit Agreement.

     NOW, THEREFORE, in consideration of the mutual promises contained in this
Agreement, the receipt and sufficiency of which are hereby acknowledged, the
parties hereto agree as follows:

     1.   The terms "Borrower" and "Borrowers" as used in the Credit Agreement,
as amended by this Agreement, shall, for all purposes, from and after the date
hereof have the meaning set forth in the first paragraph of this Agreement, and
if at any time there is only a single "Borrower," references to "Borrowers"
shall be deemed to refer only to such single "Borrower."  All references in the
Credit Agreement to "Agreement" shall from and after the date hereof mean the
Credit Agreement as amended by this Agreement.

     2.   Section 1.01 of the Credit Agreement is hereby amended by deleting
said section in its entirety and substituting therefore the following:

          Section 1.01.  The Credit.
          ------------   ---------- 

               Subject to the terms and conditions hereof, and in
     reliance on the representations and warranties contained herein,
     the Bank hereby establishes a credit facility in favor of the
     Borrower in the aggregate maximum principal amount of
     $43,500,000, as set forth below (the "Credit"). The Credit shall
     consist of (a) a secured equipment term credit in favor of PSI in
     the maximum principal amount of $18,500,000 (the "Term Credit"),
     (b) a secured revolving line of credit in favor of the Borrower
     in the maximum principal amount of $5,000,000 (the "Revolving
     Credit") and (c) a secured acquisition term credit in favor of
     the Borrower in the maximum principal amount of $20,000,000 (the
     "Acquisition Credit"). The Borrower acknowledges that the Term
     Credit Expiration Date has occurred and that no further Term
     Credit Advances shall be permitted hereunder.

                                       2
<PAGE>
 
     3.   The Credit Agreement is hereby amended by inserting the following new
section "Section 1.02A.  The Acquisition Credit." between "Section 1.02.  The
         -------------   ----------------------            ------------   ---
Term Credit." and "Section 1.03.  The Revolving Credit.":
-----------        ------------   --------------------   

          Section 1.02A.  The Acquisition Credit.
          -------------   ---------------------- 

          (a)  Terms of Acquisition Credit.  Subject to the terms and conditions
               ---------------------------                                      
     hereof, and provided no Event of Default, or event which with the passage
     of time or giving of notice or both would become an Event of Default, has
     occurred, on January 29, 1998 (the "Acquisition Credit Funding Date") the
     Bank shall loan the Borrower the Acquisition Credit.

          (b)  The Acquisition Credit Note.  All amounts owed by the Borrower
               ---------------------------                                   
     with respect to the Acquisition Credit shall be evidenced by promissory
     note of the Borrower in the original principal amount of the Acquisition
     Credit, dated the Acquisition Credit Funding Date and substantially in the
     form of Exhibit 1.02A(b) attached to this Agreement (the "Acquisition
             ----------------                                             
     Credit Note").

          (c)  Payment of the Acquisition Credit.  Unless sooner prepaid
               ---------------------------------
     pursuant to Section 1.02A(e) hereof or accelerated pursuant to Article V
     hereof, the Borrower shall repay the entire balance of the Acquisition
     Credit Note (including principal, all accrued but unpaid interest
     (including any interest accruing at the default rate) and any other amounts
     then due), without premium or penalty, on the earlier of (i) the
     consummation of a public offering of debt or equity securities of the
     Borrower for the account of the Borrower, or (ii) July 31, 1998 (the
     "Acquisition Credit Maturity Date"). Interest shall be payable on the
     Acquisition Credit Note as provided in Section 1.02A(d).

          (d)  Interest.  The Acquisition Credit Note shall bear interest prior
               --------                                                        
     to maturity or the occurrence of an Event of Default (computed on the basis
     of actual days elapsed over a 360-day year) on the unpaid principal balance
     outstanding from time to time at a rate per annum equal to the Prime Rate
     plus 1.375%.  Interest on the Acquisition Credit Note shall be payable
     monthly in arrears on the first day of each succeeding month commencing
     March 1, 1998.  After maturity, or after the occurrence of an Event of
     Default and until such Event of Default shall have been cured or waived in
     writing by the Bank, the unpaid principal balance of the Acquisition Credit
     Note shall bear interest at the Prime Rate plus 3.375%.

          (e)  Prepayment.  The unpaid principal balance of the Acquisition
               ----------                                                  
     Credit Note may be voluntarily prepaid upon prior written notice in whole
     or in part without premium or penalty.

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<PAGE>
 
     4.   Section 1.03 of the Credit Agreement (as amended by letter agreement
dated September 30, 1997) is hereby amended by deleting the date "December 31,
1997" (the "Revolving Credit Maturity Date") appearing in line 4 of paragraph
(a) thereof and substituting therefore "March 31, 1998" (the "Revolving Credit
Maturity Date").

     5.   The Credit Agreement is hereby amended by inserting the following
"Section 1.06A.  The Acquisition Credit Fees." between "Section 1.06.  Term
--------------   ---------------------------            ------------   ----
Credit Fee." and "Section 1.07.  Revolving Credit Facility Fee.":
----------        ------------   -----------------------------   

          Section 1.06A.  The Acquisition Credit Fees.  The Borrower shall pay
          -------------   ---------------------------                         
     to the Bank on the Acquisition Credit Funding Date a one-time, non-
     refundable facility fee in the amount of $300,000.

          In addition to the facility fees paid by the Borrower pursuant to the
     immediately preceding paragraph, if the Acquisition Credit is not paid in
     full on the Acquisition Credit Maturity Date, the Borrower shall pay to the
     Bank a late payment fee (the "Late Payment Fee") on the first day of each
     month thereafter until the Acquisition Credit is paid in full in the
     following amounts: (a) on each of August 1, 1998 and September 1, 1998,
     $100,000, and (b) on October 1, 1998 and the first day of each month
     thereafter, $200,000.

     6.   Sections 1.10, 4.15, 4.17, 6.01 and 6.02 of the Credit Agreement are
hereby amended by deleting said Sections in their entirety and substituting
therefor the following:

          Section 1.10.  Use of Proceeds.
          ------------   --------------- 

          The proceeds of the Term Credit shall be used by PSI solely to fund
     the purchase of Approved Equipment.  The proceeds of the Revolving Credit
     shall be used by the Borrowers solely as working capital.  The proceeds of
     the Acquisition Credit will be used to finance the purchase by the Borrower
     (or its Canadian subsidiary, PSINet Limited) of at least 51% of the
     outstanding stock of iSTAR Internet, Inc. ("iSTAR") (the "iSTAR Tender
     Offer") and for working capital.

          Section 4.15.  Loans and Investments.
          ------------   --------------------- 

          Except as set forth on Schedule 4.15 and except as otherwise consented
                                 -------------                                  
     or agreed to in writing by the Bank prior to the date hereof, neither the
     Borrower nor any Subsidiary will purchase or otherwise acquire or retain
     any stock or obligations of, or make any loans or advances to, or
     investments in, any corporation or other entity or person, other than:

               (a)  obligations of the United States of America, or any agency
     thereof, maturing not more than one (1) year from the date of issue
     thereof, or 

                                       4
<PAGE>
 
     mutual funds comprised of the same, provided that the Bank shall acquire a
     perfected first-priority security interest in such obligations
     simultaneously with such purchase or acquisition;

               (b)  certificates of deposit or other deposit obligations
     maturing not more than one (1) year from the date of issue thereof issued
     by any bank within the United States of America having total combined
     capital and surplus in excess of $100,000,000;

               (c)  short-term investment grade debt securities;

               (d)  by PSI in wholly-owned Subsidiaries, provided that the
     aggregate outstanding amount of all such amounts during this Agreement
     shall not exceed $45,000,000, excluding (i) any amounts previously advanced
     to Pipeline, it being understood that no future amounts shall be advanced
     to Pipeline without the prior written consent of the Bank, and (ii) any
     amounts owing to PSI by its Subsidiaries as a result of services rendered
     by PSI to such Subsidiaries;

               (e)  by the Borrower pursuant to the iSTAR Tender Offer; and

               (f)  loans, advances and guarantees to employees of the Borrower
     and its Subsidiaries in an aggregate amount for all of the Borrowers and
     their Subsidiaries taken together not to exceed $500,000.

          Section 4.17.  Consolidation, Merger or Disposition/Acquisition of
          ------------   ---------------------------------------------------
          Assets.
          ------ 

          Except as heretofore consented or agreed to in writing by the Bank,
     neither the Borrower nor any Subsidiary will (nor will PSI permit) without
     the prior written consent of the Bank consolidate with or merge with or
     into another firm, person or corporation, permit (to the extent within its
     control with respect to PSI) a change in control, directly or indirectly
     pledge or otherwise encumber any shares of its capital stock, sell, lease
     or otherwise dispose of (other than in the ordinary course of its business)
     all or any material portion of its properties or assets to any firm, person
     or corporation, or acquire any material amount of the properties or assets
     of any other firm, person or corporation, whether in one or a series of
     related transactions and whether by merger, acquisition of stock,
     acquisition of assets or otherwise, except as otherwise expressly permitted
     by this Agreement, provided, however, that (a) the Borrower or any
     Subsidiary may sell or otherwise dispose of any property which has become
     uneconomic, obsolete or worn out if disposed of in the ordinary course of
     business, and (b) the Borrower or PSINet Limited may purchase the stock of
     iSTAR pursuant to the iSTAR Tender Offer and consummate the proposed
     amalgamation under Canadian Law of PSINet Limited and iSTAR provided that
     PSINet Limited is 

                                       5
<PAGE>
 
     the surviving entity (the "Amalgamation"). Notwithstanding anything
     contained in this Section 4.17 to the contrary, neither the sale by PSI of
     its common stock in an initial public offering nor any other issuance or
     sale of common stock of PSI in the public market shall be deemed a
     violation of this Section 4.17.

          Section 6.01.  Term of Agreement.
          ------------   ----------------- 

          This Agreement shall terminate when each of the following conditions
     shall have been met (a) all principal of and interest on the Term Note(s),
     the Acquisition Credit Note and the Revolving Credit Note and all other
     amounts due and payable under this Agreement have been paid and discharged
     in full, and (b) no Borrower shall have any further right to borrow
     hereunder.

          Section 6.02.  Notices.
          ------------   ------- 

               All notices hereunder shall be deemed to have been given when
     delivered in person, telefaxed to the number set forth below (with receipt
     acknowledged) or, if mailed, when actually received by the party to whom
     addressed; provided, however, that any written notice given pursuant to
     Article V hereof shall be deemed to be effective when mailed, so long as
     such notice is mailed by registered mail, postage prepaid.  Such actual
     receipt shall be conclusively presumed if such notice shall be mailed by
     registered or certified mail, addressed to any party at its address set
     forth below or at any other address notified in writing to the other
     parties hereto, and if the sender shall have received back a return
     receipt, or if telefaxed to the number set forth below and receipt
     acknowledged.

          To the Bank:      Fleet National Bank
                            One Federal Street
                            Mail Stop MA0FD07A
                            Boston, MA 02110
                            Attention: Thomas W. Davies, Senior Vice President
                            Facsimile No.: (617) 346-0151

          With a copy to:   Goodwin, Procter & Hoar LLP
                            Exchange Place
                            Boston, MA 02109-2881
                            Attention: H. David Henken, Esq.
                            Telefax No.: (617) 570-8150

                                       6
<PAGE>
 
          To the Borrower:  PSINet Inc.
                            510 Huntmar Park Drive
                            Herndon, VA 22070
                            Attention: Mr. Harold Wills
                            Telefax No.: (703) 904-4200

                            PSINet Inc.
                            510 Huntmar Park Drive
                            Herndon, VA 22070
                            Attention:  General Counsel
                            Telefax No.: (703) 904-9527

          With a copy to:   Nixon, Hargrave, Devans & Doyle, LLP
                            437 Madison Avenue
                            New York, NY 10022
                            Attention: Richard F. Langan, Jr., Esq.
                            Telefax No.: (212) 940-3111


     Notwithstanding anything contained in this Agreement to the contrary,
notice to PSI shall be deemed to constitute notice to each Borrower.

     7.   Section 4.30 is hereby added to the Credit Agreement as follows:

     "Section 4.30. Agreements Relating to iSTAR.
      ------------  ---------------------------- 

          The Borrower shall deliver to the Bank executed copies of all material
     documents, instruments and agreements executed in connection with the iSTAR
     Tender Offer and the Amalgamation.  Promptly, and in any event within 5
     days after receipt of certificates for iSTAR stock delivered by the
     transfer agent or otherwise, the Borrower will deliver stock certificates
     evidencing all stock of iSTAR purchased by the Borrower and its
     Subsidiaries in the iSTAR Tender Offer."

     8.   The Borrower acknowledges and agrees that any and all iSTAR stock
owned by the Borrower and its Subsidiaries (including, without limitation,
PSINet Limited) is part of the Bank's collateral and accordingly agrees to
deliver all iSTAR stock certificates to the Bank promptly, and in any event
within 5 days after receipt of certificates for iSTAR stock (delivered by the
transfer agent or otherwise), and any failure to so deliver shall be deemed to
be an Event of Default under the Credit Agreement (which is not subject to
notice or cure). The Borrower and the Bank hereby amend the Pledge Agreement
dated as of October 1, 1996, as amended by Amendment No. 1 to the Pledge
Agreement dated as of November 18, 1996, by deleting Exhibit A thereto in its
                                                     ---------
entirety and replacing it with Exhibit A to this Agreement.
                               ---------                   

                                       7
<PAGE>
 
     9.   The Borrower acknowledges and agrees that the Obligations under the
Security Documents shall be deemed to include any additional Obligations created
by this Agreement, including, without limitation, the obligations under the
Acquisition Credit.

     10.  The Borrower hereby represents that the Leverage Ratio calculated
under Section 4.25 of the Credit Agreement as of December 31, 1997 is 1.53:1.0,
subject to any adjustment as a result of the audit of the Borrower's 1997 year-
end financial statements, such adjustment shall not result in a ratio greater
than 1.60:1.0.  The Bank hereby waives the requirement under Section 4.25 of the
Credit Agreement that the Leverage Ratio as of December 31, 1997 not exceed
1.50:1.0.

     11.  Notwithstanding the written consent of the Bank dated November 6, 1997
relating to the issuance of the Borrower's Series B 8% Convertible Preferred
Stock (the "Series B Preferred Stock") or any other consent of the Bank which
may heretofore have been given, the Borrower shall not be permitted to redeem
the Series B Preferred Stock pursuant to the provisions of the Borrower's
Certificate of Incorporation, as amended (the "Certificate of Incorporation") if
the redemption price is greater than $.01 per share of Series B Preferred Stock,
subject to adjustment in accordance with the Certificate of Incorporation.

     12.  On the date hereof, the Standby Letter of Credit No. 1091043 dated
December 31, 1997 between the Borrower and the Bank, as amended (the "Letter of
Credit"), shall be delivered by Montreal Trust Company of Canada ("MTCC") to
Michael Beairsto on behalf of the Bank for further delivery to the Bank, and
MTCC and iSTAR, as the sole beneficiaries under the Letter of Credit, shall
consent to termination thereof.  The Borrower agrees to use best efforts and to
take any actions reasonably requested by the Bank to effect the foregoing.

     13.  After giving effect to this Agreement (including Schedules 2.02, 2.06
and I attached hereto), all representations and warranties made by the Borrower
and its Subsidiaries in the Credit Agreement and the Security Documents are true
and correct as of the date hereof, except for those representations which relate
to a specific date which are true and correct as of such date.

     14.  The Borrower represents, on behalf of itself and its Subsidiaries,
that (i) the iSTAR Tender Offer and the Amalgamation have been, or will be,
consummated in accordance with all applicable laws, rules and regulations,
including without limitation, the Canadian securities laws and (ii) it has
performed and complied with all covenants and agreements required to be
performed and complied with by them under the Credit Agreement as amended by
this Agreement and the Security Documents (as amended by the First Amendment to
Amended and Restated Credit Agreement, the Second Amendment to Amended and
Restated Credit Agreement and this Agreement) except to the extent performance
or compliance has been waived or modified in writing by the Bank.

     15.  Except as amended by the First Amendment to Amended and Restated
Credit  Agreement, the Second Amendment to Amended and Restated Credit Agreement
and this 

                                       8
<PAGE>
 
Agreement and any other written agreements of the Bank, all provisions of the
Amended and Restated Credit Agreement, the Security Documents and all other
documents referred to therein shall remain in full force and effect after giving
effect to this Agreement and are hereby ratified and confirmed as being in full
force and effect and are binding upon the parties thereto in accordance with
their terms.

     16.  The amendments set forth in this Agreement shall not be effective, and
the Bank shall not be obligated to amend, modify or alter the Credit Agreement
unless and until all of the following conditions shall have been fulfilled or
waived by the Bank:

          (a)  Closing of iSTAR.  The iSTAR Tender Offer shall have been
               ----------------                                         
consummated on terms reasonably satisfactory to the Bank;

          (b)  Acquisition Credit Note.  The Borrower shall have executed and
               -----------------------                                       
delivered to the Bank the Acquisition Credit Note;

          (c)  No Default.  No Event of Default specified in Article V and no
               ----------                                                    
event which, under Article V with the giving of notice or the lapse of time, or
both, would become an Event of Default, shall have occurred and be continuing;

          (d)  Officer's Certificate for Borrower.  The Borrower shall have
               ----------------------------------                          
delivered to the Bank a certificate substantially in the form of attached hereto
with attached corporate resolutions authorizing (i) the transactions
contemplated by this Agreement and (ii) its officers to pursue a public offering
of debt securities of the Borrower, the proceeds of which may be used to, among
other things, repay the Acquisition Credit; and

          (e)  Fee.  The Bank shall have received from the Borrower a fee of
               ---                                                          
$300,000 in connection with this Third Amendment to Amended and Restated Credit
Agreement.

     17.  The Borrower agrees to cause to be delivered to the Bank within 7
business days after the Acquisition Funding Date the written opinions of (i)
Nixon, Hargrave, Devans & Doyle, L.L.P., counsel to the Borrower, and (ii)
Fraser & Beatty, Canadian counsel to the Borrower, in form and substance
reasonably satisfactory to the Bank and Bank Counsel covering such matters as
the Bank and Bank Counsel may reasonably request.

     18.  This Agreement represents the entire agreement among the parties
hereto relating to the amendment to the Credit Agreement effected hereby, and
supersedes all prior understandings and agreements among the parties relating to
the matters the subject of this amendment to the Credit Agreement.

                                       9
<PAGE>
 
     IN WITNESS WHEREOF, the parties hereto have executed this Agreement under
seal as of the date first above written.

                                   PSINET INC.


                                   By:  /s/ Edward D. Postal
                                        ------------------------------------
                                        Name:
                                        Title: Senior Vice President & CFO


                                   FLEET NATIONAL BANK


                                   By:  /s/ Thomas W. Davis
                                        ------------------------------------
                                        Name:
                                        Title: Senior Vice President

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