Need advice - previously registered domain

OK so I registered a domain a couple of months ago. I have developed and added my articles and started SEO work. I noticed the site was not ranking anywhere for my keywords so I decided to look closer at the domain since I wasn't doing anything black hat.
I found out the domain had been previously registered and allowed to expire. It was registered somewhere in 2003.
Google might have penalized the domain previously because it is a good domain and I don't see why it will be allowed to expire without anyone snatching it.

I need advice on how to rank this domain. Should I just create a new domain and redirect this domain to the new site? I have already added a lot of contents to this and done some expensive SEO so I can't just throw it away.

How you are checking your rank? Are you referring to google webmasters tool? If not then create an account with them and submit your xml sitemap to google and place robots.txt file in your root folder with allow all. Once google starts crawling your pages, you'll get to see the keywords ranked.