When you choose a picture look a bit lower down the page, you should see "Choose a fit" when you select this option you should see:
Fill, Fit, Stretch, Tile, Centre and Span.
Play about with these and it should solve your problem, obviously these options can affect the picture.
EDIT: Sorry just seen this was posted in W10 Mobile, choose your picture and then use your finger to move the picture under the representation of the Start screen and you can pinch to resize, once you are happy click select, don't worry about the black lines at the top and bottom of the preview, they don't show up.