The Jewish people of Jesus time knew from the OT Scriptures that righteousness was required to enter the Kingdom of God.
Jesus said the righteousness required was the very righteousness of God...his perfect righteousness (Matthew 5:48)
Part of the perfect righteous character of God was his gracious, compassionate heart...a heart of unconditional love, unmerited kindness, and unearned blessings.
The Hebrew word for gracious in the OT is channun.
It is used 13 times in the OT to desribe the gracious, compassionate and kind heart of God.
The Pharisees were very familiar with this word and the 13 areas in the OT which described God as channun = gracious.
The Pharisees believed they met the righteous requirements of God...being like God himself in righteousness and, therefore, gaining entrance into the Kingdom of God.
To correct this self-deceived evaluation of themselves and their false sense of righteousness, Jesus taught what we know commonly as The Sermon on the Mount.
The Sermon on the Mount is when Jesus exposed the self-righteousness of the Pharisees, showing they did not posses the righteousness of God and therefore had not gained entrance into the Kingdom of God.
One of the ways he did this was by asking them three questions in Luke 6:32-34 (read these verses in context to get the full understanding - most Bible versions use the English word "credit" rather than "grace". However, that is an incorrect translation of the word. The correct translation is the word grace.)
In these questions, he uses the Greek word charis, which is the word grace in English.
Here are the three questions:
Question #1: If you love those who love you, how is that grace (charis)? Even sinners love those who love them.
Question #2: And if you do good to those who are good to you, how is that grace (charis)? Even sinners do that.
Question #3: And if you lend to those from whom you expect repayment, how is that grace (charis)? Even sinners lend to sinners, expecting to be repaid in full.
So why did Jesus ask these three specific questions emphasizing the word grace?
He did this to demonstrate to the Pharisees that they were nothing like God...they did not possess the gracious, righteous character of God since they did not dispense unconditional love, unmerited kindness, or unearned blessings to their enemies as God did.
Not only were they nothing like God, but Jesus told them they were exactly like the sinners whom they despised!
Consequently, the Pharisees remained on the outside of the Kingdom of God looking in!
This is because the Kingdom of God is a Kingdom of Grace and only grace people are allowed in.
And who are the grace people?
Those who have addmitted their unrighteousness and then received the free gift of God's righteousness through faith in Jesus.
Thus, they become citizens of the Kingdom of God, the Kingdom of Grace.