Cursor Terminal: Scratchpad Creation Timeout Error in Cursor@1.1.6

Bug Description
When I ask Claude to create a scratch pad within a Cursor@1.1.6 terminal, it results in an error and exits. Here is the output\
\
│ │
│ Opened changes in Cursor ⧉ │
│ Save file to continue… │
│ │
│ Do you want to make this edit to scratchpad_report_testing.md? │
│ ❯ 1. Yes │
│ 2. Yes, and don't ask again this session (shift+tab) │
│ 3. No, and tell Claude what to do differently (esc) │
│ │
╰──────────────────────────────────────────────────────────────────────────────────────────────────────────────────────────╯

node:internal/process/promises:391
triggerUncaughtException(err, true / fromPromise /);
^

Error: Timeout waiting after 1000ms
at FC2 (file:///opt/homebrew/lib/node_modules/@anthropic-ai/claude-code/cli.js:1366:11718)
at process.processTicksAndRejections (node:internal/process/task_queues:95:5)
at async nF5 (file:///opt/homebrew/lib/node_modules/@anthropic-ai/claude-code/cli.js:1979:9952)
at async F (file:///opt/homebrew/lib/node_modules/@anthropic-ai/claude-code/cli.js:1979:8806)

Node.js v20.18.3

Environment Info

• Platform: darwin
• Terminal: cursor
• Version: 1.0.31
• Feedback ID: 1f81dc7c-47f8-4ee3-98b9-d6b827b746e1

Errors

[{"error":"Error: Command failed: security find-generic-password -a $USER -w -s \"Claude Code\"\nsecurity: SecKeychainSearchCopyNext: The specified item could not be found in the keychain.\n\n    at genericNodeError (node:internal/errors:984:15)\n    at wrappedFn (node:internal/errors:538:14)\n    at checkExecSyncError (node:child_process:891:11)\n    at execSync (node:child_process:963:15)\n    at NZ (file:///opt/homebrew/lib/node_modules/@anthropic-ai/claude-code/cli.js:700:3921)\n    at file:///opt/homebrew/lib/node_modules/@anthropic-ai/claude-code/cli.js:622:9014\n    at Q (file:///opt/homebrew/lib/node_modules/@anthropic-ai/claude-code/cli.js:526:17199)\n    at GX (file:///opt/homebrew/lib/node_modules/@anthropic-ai/claude-code/cli.js:622:8160)\n    at fS (file:///opt/homebrew/lib/node_modules/@anthropic-ai/claude-code/cli.js:622:7241)\n    at R9 (file:///opt/homebrew/lib/node_modules/@anthropic-ai/claude-code/cli.js:622:11408)","timestamp":"2025-06-26T17:50:03.347Z"},{"error":"Error: Failed to install new version of claude:  npm error code EACCES\nnpm error syscall rename\nnpm error p

Note: Error logs were truncated.