Multi-channel Global Position System (GPS) carrier phase signals received by the FormoSat-3 (FS3)/COSMIC program's six low Earth orbiting (LEO) satellites were used to undertake active limb sounding of the Earth's atmosphere and ionosphere via radio occultation (RO). In this study, the effects of large-scale horizontal gradients and/or inhomogeneous ionospheric electron densities (n(e)) were considered by developing an iterative scheme to determine "compensated" total electron content (TEC) values through nearby occultation observations. Using an iterative Abel inversion through "compensated" TEC values, more than one-hundred and eighty thousand vertical ionospheric n(e), profiles were collected during the intense observation period (IOP) of 20 June - 27 September (day number 171 to 210) 2006. Coincidences of GPS RO observations to ionospheric n(e) ionosonde data from forty-nine worldwide stations have been examined. It is found that the iterative scheme gives improved retrievals over the standard Abel inversion. From several thousand matches within the IOP experiment, the root mean square (rms)foF2 differences between the ionosonde measurements and the FS3/COSMIC retrievals are improved from 1.67 to 1.07 MHz. The results also show improvement in the overestimates (underestimates) on low (high) retrieved foF2s, while the obtained hmF2s give better agreement with ionosonde observations.