… Even though your username and password are correct. Hotmail on Android incorrectly reports an incorrect username or password under these circumstances:
You have selected the option to setup Hotmail on your Android as a POP3 or IMAP server instead of as an Exchange server
Your Hotmail account is set up for two factor authentication
To fix this, try your usename and password again set up using an Exchange server. If this still tells you that you have entered an incorrect username or password, then log onto your Hotmail account using a web browser and add an App password under the security setting of your account. Alternatively use the Outlook app for Android.