Itunes Store & App Store reject my correct password on iPhone

We have numerous devices iMac, MacBookPro, iPad, iPad Mini, two iphones in our family under the same Apple ID.
Everything is fine except on our iPhone 5 running iOS8.1.2
-all software is updated
-it signs in to the iCloud fine with our AppleID
-it WILL NOT sign in to "Itunes & App Store"
-it rejects the correct password and keeps asking for it. 
IT IS EXTREMELY ANNOYING! 
-i have restarted
-i have updated password for all devices
-i have updated software
-i have cleared our ipads of lingering app downloads
-i have signed into iTunes on our iMac and "cleared the cache"
-i have signed out and signed back in to iCloud
A couple of things:
-our iCloud storage is full
-this phone has been unlocked by AT&T and we are the second owner.
Please if you have the easy solution i haven't found, I would be very greatful!  Thank you.

Try a reset:
Hold the home and power buttons at the same time until the Apple boot logo appears. No data will be lost.
If it doesn't work, time for a restore.

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