issue with "Update Apple ID settings"

I am signed into my apple ID on my iPhone, iCloud synced photos, drive, etc. except for iMessage and Passwords and Keychain.

1] I am prompted to "Update Apple ID settings".

2] When I continue I have to enter Apple ID password, which goes trough.

3] Then I need to enter iPhone passcode, which goes through.

4] Then I need to "Enter Mac Password", the issue is "Verification Failed" but it is the correct password.

I reset the phone and started from scratch, same issue.

I changed the ID password, same issue.

Please help.