After some searching I came to know that are many third party tools which lets you change the color of windows folder in windows xp, vista and windows 7 as well. One such software is called Color Folder or download from this link.It lets you have multiple folders with different color, you can color any folder with any color available or create a color of your choice as well with this software. This application is free to use you just need to register it for free once. The coloring of folder is really simple and easy as you just have to select a folder right click it and select the folder color as shown in the image below.
Another free way to change windows folder color is explained at SevenForums as per which you don’t need to install any program in windows, read more here or install this theme in windows which lets you change the folder color. You can also go for another similar paid software called folder marker which has more color options and lets you change the folder color in single mouse click.
If you are not happy with above software, then there is another free program called Rainbow Folders which provide you more options in terms of color but slightly less user friendly interface then the above mentioned software’s. The working of this tool is quite different from the above mentioned tools and to color a folder with this software you will need to run the software, select the folder and then select the color for it as shown in the image below.