But CTOS is notoriously known for not updating the financial records.
In most cases, the outstanding debts have been settled, but records is still showing in CTOS.

Simply because CTOS is not obliged to update their records!
There is no regulatory body to oversee, and that it does not the capacity to go thru
every record to ensure it is updated.

And the best part is; banks do not usually tell the reason for rejecting loan applications.
It'll be very sad if it is due to CTOS records, especially if the record does not reflect the latest updated record.

And usually the applicants are not aware that there blemished records in their CTOS.
A side question;
CTOS does not notify the account holder of any claims against them, right?