You could use the existing methods from the Character class. Take a look at the docs:

http://download.java.net/jdk7/archive/b123/docs/api/java/lang/Character.html#isDigit(char)

So, you could do something like this...

String character = in.next();
char c = character.charAt(0);
...
if (Character.isDigit(c)) { 
    ... 
} else if (Character.isLetter(c)) {
    ...
}
...

If you ever want to know exactly how this is implemented, you could always look at the Java source code.

It's hard to help you do it without giving you all the code to do it, since it's so short.

Anyway for a start, since you need at least one letter and at least one digit, you're going to need two flags, two booleans, which will initially be false. You can iterate through each char in ininitialPassword by using a foreach loop:

for (char c : initialPassword.toCharArray())

And then all you have to do is check at each iteration if c is possibly a letter or a digit, and set the corresponding flag if so. Once the loop terminates, if both the flags are set, then your password is valid. This is what your code could look like:

boolean bHasLetter = false, bHasDigit = false;
for (char c : initialPassword.toCharArray()) {
   if (Character.isLetter(c))
      bHasLetter = true;
   else if (Character.isDigit(c))
      bHasDigit = true;

   if (bHasLetter && bHasDigit) break; // no point continuing if both found
}

if (bHasLetter && bHasDigit) { /* valid */ }