How to leverage offer you don’t want to take?

I am currently interviewing in a lateral process that is going well but after initial discussions I realised it is not the right fit. Is there a way to salvage an offer still into negotiating better comp / position at my current gig? People often recommend having an offer in hand when asking for a raise but how does that work if you don’t actuallh want to take the offer?
Do you tell your boss you have an actual offer? How to you balance the bluff since if your ask is declined you’d essentially be forced to take the offer after all?

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