What should i do ?? HELP?

Ok so theres this boy who like me. Everyday i see himm he give me a hug and he wonts to hug me 4a long time but i dont really like hugging him when alot of people is around because theres one problem hes always mustyy.. So when i hug him my friends laugh because they know that a musty boy likes me. Also im in 8th and hes in 6th. Im afraid that hes gonna ask me out in a few days but im scared about how to reject him in a nice way beacause hes a nice boy and im scared if i dont do it in a nice way that hes gonna not wont2talk 2me anymore. So how should i go about telling him that i dont wont 2 go out with him because he kinda stink?