The two main teachings of the Bible, law and gospel, have different and opposite messages. The message of the law reveals God’s hatred of sin and sinners (Psalm 5:5); the message of the gospel reveals God’s love of sinners. Law and gospel are opposite, but not contradictory, messages.
As Christians, we are clothed with Christ (Galatians 3:26-27), as you noted. We are wrapped in the righteousness Jesus won and which is given to us in Spirit-worked faith. Through faith in Jesus, Christians are holy in the sight of God (Colossians 1:22; Hebrews 2:11; 10:10; 1 Peter 2:9).
Yet, we still have a sinful nature, don’t we? And we still continue to sin. That’s why our Lord, in the prayer that is named after him, instructed us to petition God for forgiveness for our sins (Matthew 6:12). That same Lord intercedes on our behalf when we do sin (Romans 8:34; Hebrews 7:25).
God, who is omniscient, see all things—including our sins. The message of the law reminds us of that truth. The message of the gospel though is that, in the case of Christians, God sees people who are entirely and completely perfect in his sight through the righteousness Jesus won and which is theirs through faith. As Christians, we stand in God’s grace (Romans 5:2). Even while we are saints-sinners in this life, we have God’s own word that we are free from condemnation (Romans 8:1) and we are his dearly-loved children (1 John 3:1-3).