Rashes or spots of skin that look irritated, swollen, red or bleeding..and hairless..can be caused by many things. Excessive grooming by cage mates (why they are over breeding could be caused by several things, stress being one of them), allergic reaction to food, bedding or something else, various parasites (ticks, lice, fleas etc), fungal or bacterial infections (ringworm) etc. Stress can cause rats to over groom eachother and themselves, rub or bite at their fur/skin etc.
To find out if its parasites, bacteria, (infections can be a secondary symptom, as bitting, scratching etc can leave open wounds that get infected, and thus compound the problem..and taking care of the bacteria won't necessary solve the underlying cause), or other reason, I suggest taking your rat to a good vet. He can do various tests and determine what is causing the hair loss and redness.
-----
PHLdyPayne