After Painting your character, Save and Exit. Go to Arcade, Pair ,or training search for your character with a label of "COLOR 1" press square + circle to apply the colors you did on color edit mode.
This game is old and don't expect many players to look this topic up. Few players around the net where asking how to apply color yet remained unanswered. I hope this topic pops up on Google and help people who need this information. --- "Stand tall and shake the heavens" Xenogears Proud MHFU veteran LBG user and Ultimate TagForce Fan