Putting the password in an array of chars would be a good start. Start with an array index variable set to zero.
Then, as a character is received it can be compared to the character at the current position in the array and if correct the corresponding LED is turned on and the index to the array incremented. Once the index equals 4 (see below) turn on the fifth LED. If the wrong character is received at any time turn off all the LEDs and set the index back to zero and start again.
The value of the index to a 4 element array will be from 0 to 3, hence the test for the index reaching 4 indicating success. Do not try to retrieve or test element 4 of the array as it does not exist.