username = raw_input("Username: ")
password = raw_input("Password: ")

login = open("login.txt", "r")

for line in login:
    if line.split(":")[0] == username and line.split(":")[1] == password:
        print("It Works!")
    else:
        print("Failed")

admin:password
nimda:drowssap

# I added the 'with' clause so that the file is opened fresh each run
# (for debugging - the file cursor is iterated each time a line is read)
with open("login.txt", "r") as login:
    lines = login.readlines()

for line in lines:
    if line.strip().split(":")[0] == username and line.strip().split(":")[1] == password:
        print("It Works!")
    else:
        print("Failed")