For Code Code Readability I find declaring the variable at the beginning of a block the best option.
When going thru code you then always know where to look for the declaration instead of having to look between lines of code. It is also better when looking at a method to first see the declared variables and then the code. I think of it like a recipe in a cook book you list the needed ingredients separate from the recipe instruction.
As for performance I dont see how this would make any difference. While declaring late might save abit of memory by only creating the variable when needed at the end of a block you will use the same amount of memory you would have if you declared at the beginning of a the block.
Error prone i would say is the same reasons as readability.
Declare in the smallest scope needed and declare at the beginning of the block.
