This paper introduces a new compact polarimetric (CP) three-component decomposition scheme, which can overcome the overestimation of volume scattering power in urban areas to a certain extent. For CP three-component decomposition, degree of polarization (DoP) is one of the key parameters, and directly influences the effectiveness of the decomposition method proposed in [1]. To overcome the overestimation of volume scattering component, a new method for estimating the DoP is introduced, and with the new DoP, volume scattering power decreases significantly. By considering the original decomposition method performed effectively in forest, lawn and ocean, the new DOP is only applied in urban areas. CP data in CTLR mode simulated from Radarsat-2 C-band fully polarimetric (FP) image is used to demonstrate the validity of the new decomposition scheme.